Assisted by short covering, higher commodity prices, surging risk appetite and general US dollar weakness on the back of lower US rate expectations, the Australian dollar was propelled higher overnight, briefly trading above the 71 cent level for the first time since September 22.
As of 8.30am AEST the AUD/USD currently buys .7081.
Looking ahead to Tuesday’s trading session, Australian trade data data for August, along with the RBA’s October monetary policy decision, will likely dictate the direction for the Aussie today.
While the markets continue to price in a small possibility that the RBA may cut interest rates at this meeting, according to David de Garis, senior economist at the NAB, the RBA meeting is unlikely to “ruffle the market’s feathers too much.”
“When all is said and done, we doubt whether the post-meeting Media Release will ruffle the market’s feathers too much,” said de Garis in a research note this morning.
“The market is pricing in a 35% chance of an easing with no economist in Friday’s Bloomberg survey forecasting a cut today. Testifying before the House Economics Committee on 18 September, the RBA Governor again emphasised that while further monetary easing could yet be considered at each meeting to support the domestic economy, the Bank also has to consider the potentially greater risks in the financial sphere (house prices). He thought then that the balance was ‘about right’. Internationally, China remains under close watch and while payrolls risks pushing Fed rate lift-off timing until 2016, the fallout for the AUD, to date anyway, has been incremental rather than game changing.”
With the likelihood for a rate cut slim, most attention today is once again is expected to come from the accompanying monetary policy statement, particularly the language towards the Australian dollar.
On September 1 when the RBA last met they stated that “the Australian dollar is adjusting to the significant declines in key commodity prices.” Since that date the Aussie is largely unchanged against the US dollar despite the US Federal Reserve’s decision to leave interest rates unchanged in September and a lacklustre non-farm payrolls report released last Friday.
Any change in language towards the Aussie today will likely cause an outsized market reaction given thin market conditions resulting from Chinese markets remaining closed for the golden week holiday.
The full Australian dollar scoreboard is found below.
- AUD/USD 0.7081 , 0 , 0.00%
- AUD/JPY 85.28 , -0.01 , -0.01%
- AUD/CNY 4.5006 , 0 , 0.00%
- AUD/EUR 0.6325 , -0.0005 , -0.08%
- AUD/GBP 0.4676 , 0.0001 , 0.02%
- AUD/NZD 1.0901 , -0.0003 , -0.03%