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AUDUSD: Uncertainties galore – Rabobank

FXStreet (Delhi) – Jane Foley, Research Analyst at Rabobank, suggests that following the RBA’s policy meeting overnight, the AUD is the best performing G10 currency on a 1 day view and even though the Bank’s decision to hold interest rates on hold was expected, the lack of dovish references in its statement caught the market off guard.

Key Quotes

“The statement does not rule out further policy measures if deemed appropriate. It is made clear that “further information on economic and financial conditions to be received over the period ahead will inform the Board's ongoing assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target”.”

“In short, the policy outlook will remain data dependent. This indicates that the door to further easing is still firmly wedged open and, given the risks associated with slower growth in China and other emerging markets in addition to the persistence of the deflationary threat across much of the developed world, we continue to see risk of further RBA easing in the coming months.”

“Despite the beneficial impact to the Australian economy from the weaker exchange rate, Steven’s last month referred to “puzzles in reconciling what has happened to real GDP with what has happened to employment and indications from business surveys”. These puzzles are likely to be resolved over time.”

“However, given shocking weakness in the US September labour market data, a depressingly weak tone in August German factory order data and evidence that emerging markets collectively are no longer an engine of world growth it is likely that price of many commodities will remain depressed for some time and that the RBA will again be pressed into cutting interest rates. We continue to see scope for AUD/USD to edge towards 0.68 on a 6 month view.”

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