AUD: Scope for probe of August’s highs in the mid-0.77s - Westpac

Sean Callow, Research Analyst at Westpac, suggests that they had expected AUD/USD to emerge stronger from the BoJ and FOMC meetings, though the BoJ’s specific policy changes were somewhat surprising.

Key Quotes

“The Fed was the bigger deal for AUD/USD and should have a lasting impact. Whereas the BoJ threatened to stoke market turbulence, the FOMC’s outlook for a stronger US economy but most likely no actual rate rise until at least December is supportive of risk appetite and thus of AUD.

Commodity prices remain supportive, with our export price basket up 27% since June and RBA governor Lowe conceding that commodities do justify AUD gains to some degree. Spec positioning also has been trimmed (CME) so there does seem scope for at least a probe of August’s highs in the mid-0.77s.

Yet the Fed is confident enough to ensure a Dec hike is market consensus, limiting the extent of USD decline and thus probably preventing AUD from testing 0.78.”