DXY faded Friday night.
AUD was stable.
The bif short is, like, permanent.
Lead boots going downhill.
Commods flew as DXY paused.
Big mining bear steel counter-rallying.
EM looks more like yesteryear.
Junk OK.
As yields eased.
Stocks flat.
Goldman is modestly bearish on AUD as the RBA is run over by its own stupidity.
After a surprise hold by the RBA in July, Australia’s June labor force survey revealed a material rise in the unemployment rate.
The pause caught markets off guard, as a cut was nearly fully priced ahead of the meeting, and the previous 25bp cut in May was accompanied by dovish guidance.
The latest labor market data has consequently reinforced skepticism regarding last month’s decision and supported the argument for further policy support.
Markets added 10bps of easing to the RBA’s terminal rate following the report, and AUD weakened broadly.
Our economists continue to expect the RBA to cut 25bp at its next meeting in August, with further 25bp cuts in November and February.
…Further cuts could addadditional downside pressure to AUD/USD, but we continue to think that the broader risk backdrop and moves in USD will be more important for the cross.
Given our baseline that Fed cuts are likely to begin in September, policy easing should provide some modest relief to AUD over the medium-term, even if the tactical backdrop remains challenging.
Sounds about right to me.
