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Since the start of this year AUD/USD has dropped over 6%.  While the move is currently looking a little over-extended, judging by the current tone of the news-flow the AUD is still vulnerable to further falls over the medium-term, according to analysts at Rabobank.   

Key quotes

“As low wage inflation and soft price pressures have been symptomatic of the issues facing RBA policymakers for some time, the fall in the value of the AUD will not be totally unwelcome at the central bank – though the pace of the drop this year may be of some concern.”    

“The RBA will meet for its next policy meeting on March 3.  Last week the minutes of the February 4 meeting were released. The minutes highlighted that ‘members reviewed the case for a further reduction in the cash rate at the present meeting’, which was taken by the market as a dovish signal.”

“Any sign in next week’s meeting that policy-makers’ concerns regarding coronavirus are escalating will increase the risk of another 25 bps reduction in rates in the coming months.  This will increase downside potential for AUD/USD towards 0.65.”

 

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