The Australian dollar is under pressure and it began the week with a gap lower. And now, the big event awaiting the Aussie is the rate decision by the RBA.
What will Stevens and co. do the Aussie? The team at Credit Agricole weighs in:
Here is their view, courtesy of eFXnews:
Nobody expects an RBA rate-shift in the coming quarter. That, however, has not prevented a move in longer dated policy expectations against the AUD with 3-month rate spreads (eg, IRZ5 – IRH5) falling swiftly in recent weeks.
We expect this move to continue. As we have reiterated over the last month – and reinforced by RBA board member Kent this week – uncertainty surrounding Australia’s external outlook is growing.
In particular softening Chinese data, and their by-product of weakening bulks prices, appears likely to weigh more heavily in-nvestor minds during Q1. Contrasted against a steady improvement in the US, this should further erode AUD’s yield advantage in the coming month seeing AUD/USD make new lows.
As an aside, we expect no change from the RBNZ who, for similar reason to those RBA reasons mentioned above, should keep their powder dry until later in Q4.
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