We find ourselves facing something of a dilemma as regards the AUD in that we’d like to see the currency even lower still, but also realise that it may actually take a bit more effort from this point forward in order for the RBA to actually beat the “strong AUD” or “buy AUD aggressively off the lows” mentalities out of market participants. Consequently, we are a bit loath to start aggressively readjusting our short-term AUD forecasts on the back of this morning’s RBA rate decision and other recent events. We are at the same time, however, contemplating just how much of this latest move lower in the AUD may reflect a further evolution in the long-term uptrend for the AUD (which has been in place for a long time), and for the markets’ psychology towards the currency as well. We continue to suspect that the RBA – where possible – would like to tamper with and re-mould this psychology towards the currency whilst certain sectors of the economy adjust to or “catch-up” with its current level, which in our view is unlikely to retrace a substantial portion of its multi-year rally any time soon, if ever at all.
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BMO