AUD/USD: RBA back in the easing game – CIBC

Analysts at CIBC, forecast the AUD/USD pair will trade around 0.69 during the fourth quarter and at 0.72 in the second quarter of 2020.  

Key Quotes:  

“During its October meeting, the RBA cut rates to a record low of 0.75%. The tone was quite dovish, as Governor Lowe stated that the Bank was “prepared to ease monetary policy further if needed”. There was a key language shift in the statement regarding the RBA’s closely watched jobs number. The last statement referred to the need for ‘reducing unemployment’, whereas the RBA now indicated that lower rates will be needed to reach ‘full employment’. This emphasis suggests that disappointment in the unemployment numbers could lead to the RBA easing further.”

“AUD/USD sold off at the start of the month, but has since recovered, as markets remain optimistic on trade developments between the US and China. Although we may see a lift in AUD/USD in the near-term attributed to progress in trade negotiations, we are weary of chasing gains, as talks will likely drag on. Fundamentally, domestic retail sales continues to fall, despite the income tax cut implemented in July. Consumer confidence remains at multi-year lows, partially due to declining housing prices.”

“Although full employment has been a key focal point for the RBA, we don’t see a material catalyst for growth so long as consumption remains sluggish. Alongside risks of QE, we continue to see underwhelming price action for AUD/USD, as fundamentals haven’t showed signs of improvement and there remain risks of further cuts come 2020.”