- RBA Minutes Spark Renewed Deterioration in RBA Policy Expectations
- Aussie Dollar Weakness Likely as Post-FOMC Price Action is Unwound
The Australian Dollar stumbled after three consecutive weeks of gains,
failing to mount a sustained push above 0.94 figure against its US
counterpart yet again. As we expected, minutes from June’s RBA
meeting proved to be a major hurdle as policymakers added color to a
seemingly status-quo policy announcement with decidedly dovish
rhetoric. This led the Aussie sharply lower as rate hike bets
unwound, with a Credit Suisse gauge tracking investors’ priced-in
12-month policy outlook dropping to the lowest level in nearly three
weeks.
The week ahead will bring plenty of opportunities for the markets to
reconsider their initial FOMC reaction. A slew of economic indicators
including home sales, consumer confidence, durable goods orders, and
PMI figures are on tap. The trend in US economic news-flow marked an
important upturn relative ton consensus forecasts in early April and
has broadly (if unevenly) continued to improve since. More of the same
from upcoming releases may show investors they ought to be looking
ahead to shape their Fed outlook, not dwelling on backward-looking
reflections of weakness that policymakers have already dismissed.
Scheduled commentary from regional Fed Presidents Plosser, Williams,
Lacker and Bullard may help this cause. This means post-FOMC moves
across the asset class spectrum may be swiftly unwound, sending the
Aussie lower in the process.
