AUD/USD to test 0.74 amid squally surroundings – Westpac
|The aussie is emerging largely unscathed from a week that has included a US Federal Reserve meeting that disappointed dovish expectations, RBA minutes that revealed a subtle shift in the Bank’s thinking on the Australian dollar and continued jittery price action in global equities. Economists at Westpac still expect the AUD/USD pair to test 0.74 in the coming months.
Key quotes
“RBA commentary on the A$ in recent months has merely noted its gains and that they have been broadly in line with fundamentals, citing increased commodity prices. This week’s RBA minutes repeated that assertion, but added the caveat that, ‘a lower exchange rate would provide more assistance to the Australian economy in its recovery’. But we should not get carried away. The RBA’s A$ comments are at best lukewarm and not a precursor to an imminent shift to lower the AUD. If anything markets were braced for an even stronger signal that the RBA could deliver more easing in the near-term. That did not materialise and the A$ firmed after the RBA’s minutes, despite their slight shift in A$ messaging.”
“USD gains are likely to prove short-lived. The bigger long-term takeaway is that the Fed has fleshed out an incredibly high bar for removing accommodation. The Fed’s updated forward guidance notes that policy will remain accommodative until three conditions are met; maximum employment, inflation at 2% and inflation on track to moderately exceed 2% for some time.”
“Local and regional economic trends underscore a continuing bullish A$ story. August employment grew 111K, well ahead of expectations for a 35K decline. There are always grounds for caution over the quality of the jobs being reported and unemployment will rise as JobKeeper is reduced in Q4, but the RBA’s 10% end-2020 forecast will need to be revised.”
“We continue to look for AUD/USD to make another test of 0.74 over the next month.”
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.