Commodity bloc central banks might deliver more easing - BNPP

Research Team at BNP Paribas, notes that the markets have become more focused on the possibility that commodity bloc central banks might deliver more easing.

Key Quotes

“The CAD saw an outsized negative reaction to a slightly below consensus CPI report this past Friday and this could be a template for reaction to Australia’s Q3 CPI data on Wednesday. Our economists expect headline CPI to tick up to a 1.2% y/y rate from 1.0% previously, which is a bit above consensus. However, markets would likely be more sensitive if the data surprises on the downside in the aftermath of last week’s soft jobs reading and given that the market holds a multi-year long AUD position according to BNP Paribas FX Positioning Analysis.

We think the Bank of Canada and RBA are likely to be reluctant to ease further in the near future, and our bearish forecasts for the AUD (targeting sub-0.70) and CAD (targeting 1.35 year-end) continue to rely on Fed tightening and consequent broad USD gains and friction in the risk environment.”