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The Reserve Bank of Australia decision on Tuesday, October 6 has reinforced the possibility of an easing announcement at the upcoming 3 November rate decision: with several speeches by RBA officials keeping policy expectations in focus between now and the decision, analysts at Credit Suisse see the pre-US elections AUD/USD 0.70 target as still intact.

See: AUD/USD rallies toward 0.72 to be faded – TDS

Key quotes

“The fact that the RBA opted to wait at the 6 Oct meeting reduces to some extent the potential for AUD to trade idiosyncratically later in the year, as investor willingness to take directional views around the decision will be understandably curtailed by the coincident timing of one of the biggest risk events of the year. Nevertheless, in the weeks leading up to the election, we still see potential for RBA expectations to weigh on AUD, especially if the upcoming speeches were to focus more on the possibility of a more structured extension of QE purchases. As such, we remain focused on 0.70 as our tactical AUD/USD pre-election target.”

“The announcement of the 2020-21 budget by the Morrison administration is a less clear FX driver than the RBA decision, but on the margin is likely to be seen as a long-term positive in our view.”

“Relative to the July update, the main update on this front from Treasurer Frydenberg’s speech was that he expects ‘the unemployment rate to fall to 6.5% by the June quarter 2022’, still well above the 6.0% level where the government approach would shift to ‘rebuilding fiscal buffers’. Ahead of the event, we had mentioned the possibility of an early projection of the unemployment rate falling below 6.0% as a risk from the budget: the outcome instead reduces the risk of markets having to price in a tightening of fiscal conditions in the near-term, which all things equal we think is a positive long-term factor for AUD.”