AUD: Move lower running out of steam – ING

Analysts at ING suggest that the negative retail sales in Australia has left their economists scratching their heads; it could delay their bias for a 1Q18 RBA rate hike, but certainly the prospects of a rate cut - as floated by one RBA Board Member recently - is not our central scenario (nor the market consensus).

Key Quotes

“Neutral RBA bias remains the overarching theme, with markets only pricing in 25 basis points worth of hikes over a one-year horizon. Limited data in the Australian calendar this week to test this assumption.”

“Tumbling commodity prices are also weighing on AUD - with iron ore prices having fallen by 20% in Sep - and not starting Oct on any better footing. We expect external factors - namely how far US yields push higher - to drive dollar-bloc currencies in the week ahead. A benign open in Chinese markets following the Golden Week holiday has also eased any further near term pressure on Asian currencies.”