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  • AUD/USD is steady ahead of the Reserve Bank of Australia tonight.
  • The majority of the market expects a rate cut, if today, in November.  

AUD/USD has come under pressure in recent sessions and is st to continue the prevailing bearish 2018 trend. The global economic backdrop is a wight on the commodity complex and the  Aussie will likely continue to struggle while it is  unlikely that there will be any  pause in the ongoing trade tensions between the  US  and China.

“A  US  official has stated that there are no current plans to stop Chinese companies from listing on  US  exchanges, following a Bloomberg report at the end of last week that the Trump administration was considering such a move,” analysts at Rabobank explained.

“The newswire report had also highlighted that the  US  was mulling other potential measures which included limiting the exposure of  US  government pension funds to Chinese equities. As yet there has been no denial of that these measures are being considered. Despite the approach of high level trade talks in Washington between  US  and the China next month and news that China is prepared to open up more sectors of its economy to foreign investors, there is clear risk that tensions on the trade front are likely to prevail for some months.”

The case for an RBA rate cut

Meanwhile, the October OIS is pricing ~ a 75% chance to a 25bps RBA cut tonight – The  bulk of the analyst community (BBG: 19/25, Reuters: 25/36) expect the RBA to ease also.

“Q2’19 GDP at +0.5%/q missed the RBA’s +0.75%/q forecast and the RBA Governor noted in his Armidale address “we did not expect this slowdown, so it has come as a bit of a surprise,” analysts at TD Securities explained.  

“The RBA’s Sep Minutes removed reference to “the accumulation of additional evidence” for it to cut that had appeared in the August Minutes. With the RBA playing catch-up to achieve its late 19/20 GDP forecasts, (that assume a 25bps November cut is delivered) and the rise in spare capacity supporting the Gov’s claim that “wages growth looks to have stalled recently”, why should the RBA wait to cut?”

AUD/USD levels