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Analysts at CIBC expect the aussie to underperformance as the Reserve Bank of Australia (RBA) has reinforced its dovish policy stance. They see the AUD/USD pair moving to the downside over the next months, reaching 0.69 during the fourth quarter. 

Key quotes

“We anticipate headwinds for the aussie in the coming weeks and into the next year, via a path of challenged economic activity, and RBA easing.”

“RBA Governor Lowe and other members of the central bank have gone to lengths to prepare the market for easing at the next meeting. When the RBA meets on November 3, we expect a combination of measures to be announced. We see the cash rate target being cut from the current 25bps to 10bps and the YCC target on 3- year bonds to be reduced to the same 10bps. The rate on the term funding facility (TFF) will also likely be cut to 10bps.”

“Amongst challenges for the AUD, a deterioration in trade with China is concerning. Chinese economic activity, including trade, has rebounded strongly, but trade with Australia has not. Chinese imports in September from all countries expanded by 13.2% YoY, while imports from Australia fell 9.5% YoY and are 7.4% lower YTD YoY.”