AUD: Domestic story remains broadly supportive – Westpac

Sean Callow, Research Analyst at Westpac, suggests that the Aussie’s domestic story remains broadly supportive and while the headline 3.3% y/y GDP growth rate overstates current momentum, the RBA is unlikely to be concerned.

Key Quotes

“RBA’s Kent argued last week that ¾ of the fall in mining investment is behind us, largely removing this strong headwind from next year. And while job growth has slowed, the labour market still fits the RBA’s description of “somewhat mixed”. A mere 25% chance of a rate cut is priced by Nov (post-Q3 CPI).

Yet AUD is G10 worst on ground over the past week, with the global bond sell-off upsetting AUD’s yield appeal. Perhaps AUD/USD slips under 0.7400 around the BoJ but recovers to above 0.7500 on a dovish FOMC.”