Sean Callow, analyst at Westpac, points out that the RBA embraced the opportunity of the FOMC’s guidance of a sustained pause in rate-cutting to not only hold its cash rate steady at 0.75% but to make clear that it expects to hold again in December.
Key Quotes
“It was able to send such a message without much fear of a surge in the Aussie dollar, given that markets are pricing only a 10-15% chance of another Fed cut this year.”
“While AUD/USD did rise a little after the RBA statement, it is little changed over the week and in trade-weighted terms, remains as Governor Lowe put it, “is at the lower end of its range over recent times.” The benefits are evident in Australia’s trade position, with today’s Sep data bringing the 2019 monthly average surplus to A$6bn.”
“But the RBA is not complacent about AUD remaining weak. In retaining the pledge that it is “is prepared to ease monetary policy further if needed,” the RBA Board surely had the currency uppermost in mind. This pledge also raises questions about the durability of the unwinding of rate cut pricing – see chart across. Westpac continues to expect a cash rate cut to 0.5% in Feb 2020, at which point unconventional policy options should be a hot topic again.”
“Indeed even the week ahead could produce some wobbles for those who betting that the RBA is on hold for an extended period, with Oct unemployment and Q3 wages data due. This will be a test for AUD/USD which fell short of 0.6950 this week as the US dollar steadied with help from strong US data.”
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD struggles near multi-month low below 0.6400, US CPI eyed
AUD/USD enters a bearish consolidation phase near a multi-month low of 0.6365 set on Tuesday. China's economic woes and less hawkish RBA remain a drag on the pair. Traders await the US CPI report on Wednesday before placing fresh directional bets.
USD/JPY drops from 152.00 after Japanese PPI data
USD/JPY eases from 152.00 in Wednesday's Asian trading, stalling a two-day uptrend. A hot Japan PPI report leaves the door open for a BoJ rate hike next week, supporting the Japanese Yen while the US Dollar upswing takes a breather ahead of the US CPI data release.
Gold price holds firm at around $2,700 ahead of US CPI report
Gold price sticks to its positive bias for the third straight session and advances to over a two-week high near $2,700 early Wednesday. Geopolitical tensions and the resumption of buying by China’s central bank for the first time in seven months act as a tailwind for the XAU/USD.
Ripple's XRP breaks out of downtrend as RLUSD receives greenlight from New York regulators
Ripple's CEO Brad Garlinghouse announced on Tuesday that the company received a green light from the New York Department of Financial Services on the launch of its stablecoin RLUSD.
How the US-China trade dispute is redefining global trade
Since Donald Trump took office in 2017, trade flows and market shares have changed substantially. We think that shift is set to continue under looming tariffs and a new protectionist environment.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.