Weakness of the USD is an impediment for RBA - Rabobank

Analysts at Rabobank explained that the weakness of the USD is an impediment to the transmission of monetary policy for the RBA (and for central banks such as the BoJ, ECB and RBNZ).

Key Quotes:

"Meanwhile, despite some upward surprises in a few recent data releases, there are good reasons for the RBA to want to loosen monetary conditions again. The weakness of investment spending is a particular concern and is the sluggishness of inflation and accusations that some of the domestic banks have not fully pushed through previous interest rate cuts. If US yields and the USD were currently rising, the RBA would be able to garner more bang for its buck with policy adjustments."

"Arguably the current buoyancy of AUD/USD will increase the need for the RBA to act aggressively. While a December rate hike from the Fed should allow some AUD/USD downside, we expect only one Fed rate hike in 2017 and therefore are revising up our 6 to 12 month AUD/USD forecasts. Despite forecasting further RBA rate cuts, we see AUD/USD at 0.75 in 6 mth and at 0.74 in 12 months."