AUD/USD now looks to CPI figures – UOB

Strategist at UOB Group Lee Sue Ann has noted the relevance of the upcoming CPI results for the Aussie dollar and potential RBA easing.

Key Quotes

“The Reserve Bank of Australia (RBA) has underlined the importance of this upcoming inflation report for policy when it next meets on 1 November, and with good reasons”.

“It was surprisingly low inflation readings in 1Q and 2Q that led directly to rate cuts in May and August, leaving the cash rate at an historic low of 1.5%. Although much also depends on the RBA’s outlook on both the job and housing markets, a downside surprise in this 3Q CPI report would certainly lead the RBA to reinstate a clear easing bias”.

“We believe it would take a very weak and disappointing inflation number to push the RBA into easing yet further. Otherwise, signs of stability in the Australian economy, alongside the latest speech by Lowe, support our long-held view for the RBA to keep rates steady for now. On AUD/USD, barring an extremely low Q3 Australian CPI print, the currency pair is likely to stay supported around the 0.760-levels and may drift higher towards 0.770 in the near term.