MUFG Research discusses AUD outlook and flags a scope for further downside on RBA easing expectations.
"The Australian dollar has underperformed during the Asian trading session following the release of the much weaker than expected Australian employment report for October. It has resulted in the AUD/USD rate falling back below 0.6800-level which has largely reversed the relief rally from last month triggered by building optimism over a US-China partial trade deal. The relief rally ran out steam after it failed to break above resistance from the 200-day moving average at 0.6940. It fits with our view that the Aussie remains subject to downside risks as the RBA moves closer to unconventional easing," MUFG notes.
"The RBA is running out of room for conventional easing having already lowered their key policy rate by 75 basis points this year to 0.75%. The Australian rate market has since moved to more fully price in another 25 basis point cut early next year after today’s weak data. The latest labour market report revealed that the Australian economy shed 19k job in October which was the weakest reading since September 2016. The unemployment rate also resumed its gradual grind higher to 5.3% moving further away from the RBA’s NAIRU estimate of around 4.5%," MUFG adds.