28 Oct 2015
AUD: Weak inflation reincarnates easing expectations from RBA - MUFG
FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, notes that the Australian dollar has weakened sharply in the Asian trading session following the release of the latest Australian CPI report for Q3 which has reinforced market expectations that the RBA will ease monetary policy further.
Key Quotes
“The Australian dollar is also being undermined by renewed weakness in Australia’s key export prices. Over the last month the price of iron ore has been gradually moving back towards the cyclical low from April.”
“The latest CPI report revealed that both headline and core inflation measures both disappointed expectations in Q3. Most notably core inflation measures eased towards the bottom of the RBA’s target range increasing by annual rates of 2.1% and 2.2%.”
“With downside risks to growth building from slowing growth in emerging economies especially in China and inflation already uncomfortably low it is increasing pressure on the RBA to deliver further monetary easing. The RBA could deliver another 0.25 percentage point rate cut as early as at next week’s policy meeting keeping the Australian dollar under downward pressure in the near-term.”
“The developments reinforce our bearish outlook for the Australia dollar. We expect the Australian dollar to fall to new cyclical lows before year end breaking through support from the lows from September at just below the 0.6900-level.”
Key Quotes
“The Australian dollar is also being undermined by renewed weakness in Australia’s key export prices. Over the last month the price of iron ore has been gradually moving back towards the cyclical low from April.”
“The latest CPI report revealed that both headline and core inflation measures both disappointed expectations in Q3. Most notably core inflation measures eased towards the bottom of the RBA’s target range increasing by annual rates of 2.1% and 2.2%.”
“With downside risks to growth building from slowing growth in emerging economies especially in China and inflation already uncomfortably low it is increasing pressure on the RBA to deliver further monetary easing. The RBA could deliver another 0.25 percentage point rate cut as early as at next week’s policy meeting keeping the Australian dollar under downward pressure in the near-term.”
“The developments reinforce our bearish outlook for the Australia dollar. We expect the Australian dollar to fall to new cyclical lows before year end breaking through support from the lows from September at just below the 0.6900-level.”