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Sean Callow, analyst at Westpac, suggests that the RBA’s rate cut was 80% priced but the statement was dovish enough to keep yields trending lower and was reinforced by Governor Lowe’s speech, soon after which AUD/USD slipped below the 7 Aug (RBNZ -50bp) low, for its weakest levels since March 2009.

Key Quotes

“Yet AUD/USD still hasn’t closed below 0.6700 since the GFC, showing notable resilience this week in the face of steep global equity declines. For now at least, the stronger force appears to be the fall in US yields, with plenty of scope for more Fed easing to be priced in, depending on data – US Sep NFP of course looms. An overhang of spec shorts also limits AUD downside.”

“On the commodity side, China’s holidays limit guidance on iron ore but Australia’s trade surplus remained historically very large in Aug even as prices tumbled.”

“Soft shipments from Brazil add to the sense that resources export earnings might hold up for a while yet.”

“Into the US-China trade talks, AUD/USD should gyrate either side of 0.6700, neutral on the week.”