![(07NOVEMBER 2017)DAILY MARKET BRIEF 1:RBA maintains its wait-and-see approach (07NOVEMBER 2017)DAILY MARKET BRIEF 1:RBA maintains its wait-and-see approach](https://c.mql5.com/6/790/splash-711740.jpg)
(07NOVEMBER 2017)DAILY MARKET BRIEF 1:RBA maintains its wait-and-see approach
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The US dollar extended gains against all of G10 currencies on Tuesday. The gains were quite limited as investors awaited several key speeches today. Draghi will speak at GMT 9 am, while across the Atlantic Poloz (BoC) will give a press conference this evening. In Australia, the central bank (RBA) held the Cash Rate Target unchanged at record low 1.5%. Governor Lowe made few changes to the statement and maintained its growth forecast of around 3% over the few next year. The RBA also expressed its concerns about the weakness in inflation (CPI eased to 1.8%y/y in the third quarter, down from 1.9% in the previous one) and reiterated its warning that further strength of the Aussie could only worsen the situation.
The Reserve Bank of Australia finds itself in a tricky place, as the economy kept improving and reducing its dependence to the mining sector, while on the other hand a few indicators such as inflation and retail sales are sending mixed signals. The RBA will wait patiently on the sidelines for a long-time. The market is not pricing any rate hike before at least the end of the summer 2018. Against such a backdrop, the risk is significantly skewed to the downside in AUD/USD. However, upside risk is not zero as an positive surprise in inflation together with another disappointment regarding Trump tax plan could trigger an AUD rally.
AUD/USD is currently testing the key 0.76-0.77 area and has been unable to validate a break of the $0.77 resistance (200dma). The USD rally is losing steam amid a lack of positive news in the US. Therefore, a return towards $0.78 appears likely in the short-term. In the longer-term, we maintain our bearish view.
By Arnaud Masset