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AUD/USD rally continues ahead of Q3 CPI and US Fed

Published October 30, 2019

Author: Hayden Carswell

Overnight RBA Governor Lowe reiterated that “The Board is prepared to ease monetary policy further if needed”; and while “it is extraordinarily unlikely that we will see negative interest in Australia”, Lowe said it likely “that we will require an extended period of low interest rates to reach full employment and for inflation to be consistent with the target”.

Today we get to see the impact of previous rate cuts on inflation with Q3 CPI data out at 11.30am. The RBA’s preferred measure of inflation; the trimmed mean; is expected to remain unchanged at 0.4% for the quarter and 1.6% year on year (yoy); although headline inflation is forecast to rise slightly to 1.7% yoy.

Interest rates remain in focus overnight with the US Fed expected to deliver a 25 basis point cut early tomorrow morning. It will be what Chairman Powell says post rate cut that will drive Markets. Any indication that the easing cycle is over for the foreseeable future will likely see Stock Markets sell-off, the USD bought and the current AUD/USD compromised.

US-China trade and BREXIT remain unresolved issues and will continue to inhibit strong directional moves in currencies.

The AUD/USD finds itself pushing toward 0.6880 resistance as the above unfolds.