All eyes on RBA as AUD seeks catalyst for direction
Tuesday 1 November, 2022
Daily Currency UpdateAn uneventful start to the new week saw the AUD track between US$0.6370 and US$0.6430 as investors prepare for a week loaded with headline risk events. The RBA, Federal Reserve and Bank of England all meet to assess monetary policy conditions while, key US labour market data and manufacturing activity updates dominate the macroeconomic ticket. Our attentions turn first to the RBA. Having tapered the pace of interest rate hikes last month many market analysts anticipate policy makers will maintain the revised schedule of tightening, proffering a 25-basis point adjustment. That said, last week's stronger than anticipated inflation print may push the board toward another 50-point hike. The need to control price pressures while balancing the threat of recession remains front and centre for policy makers. Assuming the RBA maintains the status quo, our attentions turn quickly to the accompanying rate statement. Forward guidance will be key in determining near term AUD direction. With major central banks suddenly adjusting their overtly hawkish rhetoric an optimistic RBA could help fuel a surge in near term rates and drive the AUD toward $0.65 US cents.
Key MoversThe US dollar outperformed most major counterparts through trade on Monday amid month-end rebalancing ahead of key headline risk events. Treasury yields pushed higher on the day, driving the USD upward against both the GBP and euro while climbing back toward 149 against the Yen. Despite ramping up its FX intervention through October the Japanese Ministry of Finance has failed to make a significant and meaningful dent in quelling JPY weakness. Our attentions turn now to this week’s all-important FOMC and Bank of England monetary policy updates. Rumours of a pivot in the Fed’s tightening cycle have weighed on the USD through the last two weeks and there is now scope for a broader USD rebound in the wake of Thursday’s policy announcement. We anticipate the FOMC will issue another 75-point rate hike, thus our attentions are firmly affixed to the accompanying rate statement and forward guidance on expectations for December and 2023. Sustained strength across the labour market and persistent inflation will allow policy makers to maintain an aggressive policy stance into the end of the year. Push back against the recent shift in market narrative will likely fuel a USD upturn as investors re-adjust expectations into years end.
- AUD/USD: 0.6320 - 0.6480 ▼
- AUD/EUR: 0.6380 - 0.6550 ▲
- GBP/AUD: 1.7720 - 1.8180 ▼
- AUD/NZD: 1.0950 - 1.1050 ▼
- AUD/CAD: 0.8650 - 0.8750 ▼