AUD/USD struck a weekly high (0.7343) as the minutes from the Reserve Bank of Australia (RBA) showed the central bank had little appetite for easing monetary policy further.
The Federal Reserve interest rate decision could support the current trend as the Fed aims to target an average inflation level of 2%
AUD/USD could carry on falling from the 2020 high (0.7414) as the RBA looks set to continue using its current tools to cushion the economy and aid the economic recovery
The RBA mildly adjusted the Term Funding Facility in September and could now sit in wait and see mode.
Governor Lowe and RBA policy makers recognise how further monetary measures could support the recovery” and affirmed that “further purchases should be undertaken as necessary to maintain the target.”
Australia’s Employment report is expected to show the economy lost 50K jobs in August, potentially influencing the RBA’s outlook. However, the macroeconomic environment may keep AUD/USD buoyant prior to the next RBA monetary policy announcement on October 6 given the Fed’s adoption of a strategy which allows inflation to overshoot the 2% target.
Consequently the Summary of Economic Projections (SEP) could drive the AUD/USD if the dot-plot is downwardly revised.. A continuation of the rhetoric from the June meeting could see a limited reaction as to the central bank pledges to “increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace.”
Current trends could remain for the pair as the RBA says that it won’t take rates into negative territory and the crowding behaviour in AUD/USD could hold into month end as retail traders have been net-short for 5 months.