AUD/USD: RBA and US elections to push for a move below 0.70 – Westpac
|AUD/USD witnessed some selling after rising to fresh one-week tops, around the 0.7135-40 region. The prospect of a huge Reserve Bank of Australia (RBA) policy move coming just hours before polls close in the US on November 3 adds to the risks that this “double-header” event may yet push the aussie below 0.70, at least in the short-term, per Westpac.
Key quotes
“A Democratic sweep scenario would arguably tip the scales to much larger and more comprehensive fiscal support. However, while bond markets appear to be leaning towards pricing more risks of a ‘clean sweep’ for Democrats, polls appeared to have narrowed slightly ahead of the second and last US Presidential debate, so which candidate ‘wins’ and what impact that it has on polls will be important for bond and equity investors next week.”
“The RBA looks set to announce sweeping changes including a cut in the cash rate, the 3yr target bond rate and the rate on the term funding facility. The RBA will cut the rate on exchange settlement accounts where banks can deposit cash at the RBA which could see markets begin to intermittently trade negative interest rates here in Australia and will announce a significant move in its bond purchase program to one of purchasing Australian government bonds and semi government bonds, across the curve, including maturities in the 5 – 10-year range. Such a move would bring the RBA more into line with other Central Banks like the Fed, Bank of Japan, ECB etc and that was one factor that drove the Australian dollar down to a four-week low on Tuesday at 0.7021.”
“So the prospect of a huge RBA policy move coming just hours before polls close in the US on November 3 adds to the risks that this ‘Double Header’ event may yet push the AUD/USD pair below 0.70, at least in the short term though record Chinese steel production driving very strong iron ore prices and a rising RMB may limit any dips.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.