AUD/USD: RBA cautious tone to cap aussie around 0.70 – Westpac


AUD/USD stays compressed around 0.6955, down 0.25% on a day, after the Reserve Bank of Australia (RBA) held benchmark interest rate unchanged near 0.25% while citing economies fears in the rate statement. Economists at Westpac expect the forehanded tone to cap any potential AUD/USD move above 0.70.

Key quotes

“In the July statement, the RBA did note that ‘conditions have … stabilised recently and the downturn has been less severe than earlier expected’; ‘the decline in hours worked was considerably smaller than in April’; ‘there has also been a pick-up in retail spending in response to the decline in infections and the easing of restrictions’.”

“They went on to note that ‘uncertainty about the health situation is making many households and businesses cautious’; ‘the pandemic is also prompting many firms to reconsider their business models’; and ‘as some businesses rehire workers as demand returns, others are restructuring their operations’ all of which adds to the sense of caution within the statement, especially as we start to reverse re-openings in some states.”

“We would expect the more cautious theme to cap the aussie close to 0.70 - certainly the language is less supportive this month versus last. However, yet again, there was no mention of the currency in today’s policy statement.”

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