AUD to remain capped at 0.80 - Commerzbank

Esther Reichelt, Analyst at Commerzbank, suggests that they expect AUD-USD to remain capped at 0.80 until year-end, led by RBA’s cautious approach.

Key Quotes

“Since mid-July it was the Reserve Bank of Australia’s (RBA) main aim to disconnect itself from the expectation of globally tighter monetary policies. AUD appreciated notably after the Bank of Canada had raised interest rates in July and September. The two commodity currencies CAD and AUD are often mentioned together in the G10 universe so that rising interest rate expectations for Canada had a huge impact on AUD. As a result the RBA decided to put on the brakes and explicitly warned in its statement that higher AUD-USD exchange rates were contributing to lower price pressure and that further appreciation would slow the projected recovery of the economy.”

“A clear subliminal warning that rate hikes might come later than projected or that in the worst case scenario there might even be a discussion about a further rate cut. The inflation data for Q3 due for publication tonight will therefore offer the market a first opportunity to gauge how urgent the RBA’s concerns are. It is expected that the rate of inflation will return to the lower end of the RBA’s target corridor with 2.0% yoy. That would certainly not mean the RBA could relax but should cement the status quo for now: the RBA remains cautious and will take its time as long as AUD-USD does not rise notably for now.”