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The Reserve Bank of Australia (RBA) described the outlook for the global economy as “reasonable”, the Westpac FX Strategists said in a quick response to the RBA interest rate decision due earlier today at 0330 GMT.

Key Quotes:

“Given the backdrop of the rapid spread of the novel coronavirus, the sharp drop in commodity prices and the potential hit to tourism/ services as a result of the bushfires in Australia, markets could have been forgiven for going into today’s RBA meeting with a downbeat outlook.

That view was not obvious in RBA statement with the outlook for the global economy described as “reasonable”; no change in growth forecasts for Australia; no mention of the sharp drop in commodity prices and the impact of coronavirus seen as “temporary”.

Not surprisingly, the A$ has popped higher as a result of the more upbeat statement to a high of 0.6725. The move could extend slightly further towards 0.6750, however, we doubt that we will see much further strength near term.

Indeed, much above 0.6775/ 0.68, our fair value methodology suggests the A$ would be expensive given the sharp drop in commodity prices seen so far this year.”