The relative strength of the Australian economy may induce speculators to believe that the Reserve Bank of Australia will follow the Fed’s aggressive stance demonstrated at the June FOMC meeting. However, since RBA Governor Lowe stated in his keynote speech in June that the RBA sees no specific risk to the medium-term inflation forecast, Rabobank economists believe the central bank will be more dovish in its July policy announcements.” The RBA has long been concerned about wage stagnation, which was reaffirmed in Lowe’s June key note address. This was not far from record lows even before the crisis. Despite the fact that the Australian economy has recently performed better than expected and inflation expectations have risen (albeit only to the RBA’s forecasts), the RBA has reason to believe that inflationary pressures will remain subdued over the medium term due to excess capacity in the labor market.”
“More recent news about lockdowns and COVID-19 is another cause to be cautious. Beyond the pandemic, the RBA must examine the impact on trade of a deteriorating relationship with China.”
“We’ve been saying for a while that the AUD/USD will struggle to stay above 0.78 on a 6-month basis, and the recent strengthening of the USD backs up our prediction. Our one-month prediction has been adjusted from 0.77 to 0.76.”/n
