AUD plunges following dovish RBA pivot
Written by
Daily Currency Update
The AUD moved lower Tuesday, unwinding all the goodwill that followed Monday’s monetary and fiscal stimulus promises from China’s Politburo. The Reserve Bank of Australia surprised the market, shifting language within its monthly post-rate statement and adopting a more Dovish lilt. Softer-than-expected data prompted policy makers to issue a deliberate pivot away from the possibility of future rate hikes and acknowledgement that inflation is now moving sustainably toward the target. The statement and Governor Bullock’s comments following the rate decision sent a clear message to the market that the next policy move will be a cut. Analysts bought forward rate cut expectations and are now betting the RBA will issue a 25-point adjustment come February next year. The AUD and domestic rates plunged following the meeting sliding back below US$0.64, extending losses overnight, marking lows of US$0.6367.Our attention now turns to Commentary from RBA deputy Governor Andrew Hauser as he hits the wires this evening while US CPI and the Bank of Canada policy announcement headlined the offshore macro docket.
Key Movers
The US dollar strengthened through trade on Tuesday and showed little sign that its post-election rally would end. The DXY index climbed 0.4% amid significant rebalancing of the AUD NZD, euro and yen. The euro eyed a break below 1.05 before finding support while the JPY allowed the USD to push back above 152. Commentary from Bank of Japan Governor Himino suggested a December rate hike is now unlikely, and it is expected any policy change will now be deferred through the New year.Our attention now turns to US CPI data. We expect a further contraction in the annual rate of inflation and are keenly attuned to the final headline print as a key marker leading into next week’s FOMC policy meeting. A surprise uptick inflation pressure will likely diminish calls for a final quarter point cut this year and add further strength behind the USD.
The Bank of Canada will also make its final policy decision for 2024 overnight. We expect a 50-point cut.
Expected Ranges
- AUD/USD: 0.6300 - 0.6480 ▼
- AUD/EUR: 0.6000 - 0.6100 ▼
- GBP/AUD: 1.9700 - 2.0100 ▲
- AUD/NZD: 1.0950 - 1.1050 ▲
- AUD/CAD: 0.8980 - 0.9120 ▼