Although commodity price support remains strong, the Reserve Bank of Australia (RBA) may issue a cautionary statement. According to Westpac economists, a strong dollar and anticipated ongoing covid cases suggest to a drop in the AUD/USD pair to 0.7400/25.
“By holding the decision on the 3-year rate goal and the $100 billion QE program in July rather than August, the RBA has ensured that Tuesday’s meeting will be one of the most important of the post-pandemic years. Governor Lowe will also deliver’remarks’ 90 minutes following the statement to expand on the decision.”
“Since the RBA’s June meeting, key events such as Australia’s booming May jobs data and the Fed’s step toward tapering QE have solidified consensus on no extension of the 0.1 percent bond target (i.e. 3 years is now 2yr 9mths and shrinking), plus an extension of QE but at a weekly pace that is easier to trim than a lumpy $100 billion total. As a result, assessing A$’s reaction to the decision is difficult.” “There is speculation that Australia’s present Covid clusters, particularly in Sydney, may force the RBA Board to lean dovish, albeit only in rhetoric rather than policy settings.”
“The commercial position of Australia is still very strong. This puts our fair value estimate near 0.85, but a strong US dollar and likely ongoing CoVID-19 cases lead to a fall below 0.7400/25 in the near term.”/n
