What a difference a couple of days make.
After RBA Governor Glenn Stevens focused on the Aussie dollar being too high in Tuesday’s statement justifying a rate cut, but dropped the central bank’s explicit easing bias, forex traders took the Aussie back up above 80 cents. It fell back a little last night as the US dollar rallied again, but this morning statement on monetary policy (SoMP) has put rate cuts back firmly on the table.
Forex traders didn’t like that, or the RBA’s explicit comment that the Aussie dollar is not helping the economy in the manner that it should be: “the exchange rate continues to offer less assistance than would normally be expected”.
So even though the technical assumption in the SoMP is that the Aussie dollar is at 80 cents over the forecast period, that fact that both the terms of trade and growth have been downgraded, and the door is ajar for lower rates, the Aussie traded down to a low of 0.7870 soon after the release.
In the current environment, with so many crosscurrents, the Aussie dollar is as much a hostage to global events as it is to the RBA’s apparent concerns on growth and easing bias. Indeed, it’s slipped a little further after Chinese trade data printed with a big miss soon after the SoMP and aof course tonight we get the release of non-farm payrolls in the US.
So, we’ll see what happens tonight, but the RBA will be hoping for strong US non-farm payrolls to drive the Aussie lower still.