This week’s RBA monetary policy announcement is unlikely to surprise. During his semi-annual testimony on 20 August, central bank Governor Stevens indicated that lower interest rates were unlikely to accelerate growth and that additional easing is unlikely to have any material impact on the currency.
Accordingly the central bank is likely to remain confident with signalling an unchanged monetary policy stance for longer.
Stable monetary policy expectations should leave the currency driven by external factors such as risk sentiment and capital flows. Regardless of intensifying Russia/Ukraine related geopolitical tensions, risk sentiment has remained broadly stable.
As we do not expect considerably rising risk aversion, we expect any AUD downside from the current levels to remain strongly limited. From a broader angle we remain in favour of buying the AUD against currencies such as the EUR.
Credit Agricole