Australian Dollar Outlook - Oct. 7, 2015

Bell FX Currency Outlook: The Australian Dollar is stronger this morning following yesterday’s decision by the RBA to leave the cash rate on hold at 2%.

Australia: The AUD has appreciated overnight while Treasury yields are slightly lower. Short positioning continued to get liquidated yesterday as the RBA left its post meeting statement almost entirely unchanged, signalling no rate cuts in the near term. This, together with continued consolidation in the USD, pushed the AUD up towards key resistance levels. Further gains from here are contingent on some better domestic news. In fact, quite a few currencies have reversed falls of recent weeks. Indonesia, Russia, Brazil, Norway and Sweden are all higher. In terms of the AUD, the accompanying RBA statement didn’t offer much in that it essentially has read the same for 3 months now. The text of the Statement had very few changes, suggesting the Bank has not changed its view of the economy significantly. The AUD was again described as “adjusting to the significant declines in key commodity prices” (the identical phrase to the past three statements, but one which implicitly suggests the Bank expects the $A to continue to adjust lower), while the final “policy paragraph” has also been unchanged for the past three months. Today, we have minor local data in the form of Construction PMI. Additionally, RBA Assistant Governor Guy Debelle is due to speak at the launch of the Australian Financial Markets Report.

Majors: The USD was broadly weak overnight, with EUR strong despite weak factory orders. As stated above, the AUD strengthened following the RBA statement. The NZD did as well. The US trade deficit widened in August suggesting net exports will subtract significantly from Q3 GDP growth. The IMF cut its global growth forecasts for 2015 to 3.1%, whilst the 2016 global growth forecast was lowered by slightly to 3.6%. The IMF noted risks remained firmly skewed to the downside with Chief Economist Blanchard noting that “the post-crisis world is one of high debt and it doesn’t take much with these debt dynamics to go wrong”. San Francisco fed President John Williams gives an outlook speech in San Francisco tonight while in the UK, industrial production will be scrutinised. Good luck today.

Economic Calendar 07 OCT

• JN BoJ Monetary Policy Statement/Press Conference
• AU AiG Construction PMI Sep
• UK Industrial Production Aug
• EU Industrial Production Aug

[Kick off your trading day with our newsletter]
More from IBT Markets:
Follow us on Facebook
Follow us on Twitter
Subscribe to get this delivered to your inbox daily