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CBA: There's a reasonable chance Glenn Stevens will jawbone the Australian dollar today

Photo: Miguel Villagran/ Getty.

The Australian dollar fell for a second consecutive session on Monday, dragged lower by broad-based US dollar strength in what was a quiet day of trade.

As at 7.55am AEDT, the AUD/USD buys .7577, down 0.29% on Friday’s closing level.

AUD/USD Daily Chart

While there is second tier domestic data released during today’s session, Richard Grace, CBA’s chief currency and rates strategist, believes that most market attention today will be around a speech delivered by RBA governor Glenn Stevens later in the session.

“AUD/USD has tracked sideways ahead of a speech by RBA Governor Glenn Stevens at 4.15pm AEDT today to the ASIC Annual Forum,” says Grace. “Stevens may attempt to jawbone the AUD lower in the Q&A session given the market/media focus, and the move by the rates market to price a rate cut because of the lift in AUD.”

While other RBA speakers have forgone the opportunity to talk down the Australian dollar of late, otherwise known as “jawbone”, Grace suggests there is a risk that Stevens may take the opportunity to place downward pressure on the Aussie following a 11% rally since mid-January this year.

“The potential for Stevens to ‘jawbone’ the AUD is reasonable,” says Grace. “But given the rise in the AUD has tracked the lift in commodity prices and improved financial market risk sentiment, it appears premature to expect Stevens to deviate from comments made recently or by other members of the RBA recently (i.e. that the AUD is adjusting to the evolving backdrop, or as per Assistant Governor, Guy Debelle put it, “we would welcome a slightly lower exchange rate, like everyone else, in helping the rebalancing of our economy. But obviously not everyone can have that”).”

“If RBA Governor Glenn Steven successfully jawbones the AUD down today, we anticipate a temporary dip in AUD/USD.”

Outside of Stevens’ speech, the domestic data calendar is largely devoid of market moving events. The ANZ-Roy Morgan consumer confidence index will be released domestically as will the backward-looking ABS house price index. Neither is likely to unsettle the Aussie one way or another.

If anything, the PBOC’s yuan fix shortly after 12.15pm AEDT will likely generate the most intraday volatility in the Aussie before Stevens speaks. Given US dollar strength on Monday, another weaker CNY fix is the most likely scenario, something that may weigh on the Aussie as a consequence if the recent price action is anything to go by.

Here’s the current Australian dollar scoreboard.

  • AUD/USD 0.7577 , -0.0022 , -0.29%
  • AUD/JPY 84.82 , 0.05 , 0.06%
  • AUD/CNH 4.9122 , 0.0023 , 0.05%
  • AUD/EUR 0.6740 , 0.0001 , 0.01%
  • AUD/GBP 0.5272 , 0.0026 , 0.50%
  • AUD/NZD 1.1200 , 0.0033 , 0.30%

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