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Aussie tumbles after RBA cut rate to 0.75

AUD - Australian Dollar

The Australian Dollar was the worst performing currency overnight, falling 0.75% to touch its lowest level since 2009. Opening this morning at 0.6701, the Aussie remains under-pressure after the RBA cut the cash rate by 0.25 as widely expected. While the rate cut was mostly expected, it was the RBA’s accompanying commentary that dished out the most damage. The RBA noted that “an extended period of low interest rates” was necessary to reach full employment, rather than a simple fall in the unemployment rate. The market reacted poorly to the news with the Aussie reacting almost immediately to price in the potential for future rate cuts and a ‘lower for longer’ rate environment. A November rate cut is now 50% priced in with an additional 25BPS cut also a risk next year should fiscal policy not be forthcoming.

Moving into Wednesday, the Aussie is set to enjoy a quiet day on the economic calendar locally. Attentions however will shift to the US for direction with ADP non-farm employment set for release as well as crude oil inventories.

Key Movers

The United States Dollar fell sharply overnight as the US ISM Manufacturing Survey came in well below expectations and hit its lowest level since the GFC. The US Dollar Index reflected this change with the DXY having hit a 2 year high earlier in the session, only to unwind and fall 0.3% for the day after the survey was released. With manufacturing making up around 10% of the US economy and falling into contraction territory, attentions will be fixed on non-manufacturing ISM and non-farm payrolls to hopefully show signs of resilience or the fears of a US recession will undoubtedly grow louder.

Safe Haven currencies, the Japanese Yen and Swiss Franc are the top-performing currencies over the past 24 hours with both approximately 0.4% higher after the Greenback wobbled due to the ISM survey. The Euro also was up 0.3% to open at around 1.09.

Expected Ranges

AUD/CAD: 0.8831 - 0.8898 ▼

AUD/EUR: 0.6101 - 0.6164 ▼

GBP/AUD: 1.8297 - 1.8362 ▲

AUD/NZD: 1.0708 - 1.0773 ▲

AUD/USD: 0.6665 - 0.6745 ▼