Search ForexCrunch

September was a poor month for risk, and the aussie was no exception falling 4%. In a lot of ways, such a correction is a healthy signal in the context of a rally that has barely paused since March. Forward indicators of global trade suggest there is reason for optimism beyond the US election, per ANZ Bank.

Key quotes

“The shape of the post-lockdown growth path reignited concern with global data momentum fading and fresh restrictions in Europe and a diminishing chance of near-term US fiscal stimulus hurting confidence. Anxiety about the US election helped drive a more defensive posture in FX markets.” 

“The valuation stretch in equity markets had reached historic highs, which sits oddly when most countries’ unemployment is still about twice what it was before the pandemic. Australia’s Reserve Bank was a headwind through September as speculation mounted about further action. Market enthusiasm for a micro-cut or expansion in the bond-buying program has since given way to expectations that the Board will wait to gauge the fiscal assistance in October’s federal budget. Early indications are that it will be substantial, lessening the need for more monetary policy until next year.” 

“Forward indicators of global trade, like South Korean exports and order-to-inventory ratios, suggest there is reason for optimism beyond the US election, leaving us comfortable with our upward trajectory for AUD forecasts into year-end and 2021.”