AUD/USD holds near 0.6500 – BBH

AUD/USD is directionless just above psychological support at 0.6500. The RBA Minutes of the July 8 policy meeting confirmed more easing is in the pipeline. Indeed, 'All members agreed that…the outlook was for underlying inflation to decline further in year-ended terms, warranting some additional reduction in interest rates over time', BBH FX analysts report.

RBA signals more easing ahead

"Recall, at that meeting, the RBA unexpectedly voted by a majority of 6-3 (unattributed) to hold rates steady at 3.85%. At the time, the swaps market had virtually fully priced-in a 25bps cut. According to the Minutes, a minority of members judged that the 'downside risks to the economic outlook' supported the case to lower the cash rate target at this meeting."

"In contrast, a majority of members judged that lowering the cash rate a third time within the space of four meetings would not be consistent with “a cautious and gradual” approach to monetary policy easing."

"The RBA looks set to resume easing on August 12. RBA cash rate futures fully price-in a 25bps cut in August and 75bps of total easing in the next 12 months. Meanwhile, the Bank of Canada (BOC) is nearly done easing. As such, AUD/CAD has room to grind lower towards the bottom of its three-month 0.8800-0.9000 range."