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Sep 24 - 10:55 AM

Credit Agricole: AUD Gains Boosted by PBoC and RBA Actions

By eFXdata  —  Sep 24 - 09:30 AM

Synopsis:

The Australian dollar (AUD) receives support from recent actions by both the People's Bank of China (PBoC) and the Reserve Bank of Australia (RBA), leading to modest gains in iron ore prices and the AUD.

Key Points:

  1. PBoC Measures:

    • The PBoC announced several measures to bolster China's economic recovery:
      • A 20bp cut to the 7-day reverse repo rate to 1.5%.
      • Plans to cut the reserve requirement ratio (RRR) by 50bp soon, with an additional 25bp cut expected by year-end.
      • A reduction in the down payment for second homes from 25% to 15%.
      • Increased support for buying unsold homes.
    • These announcements positively impacted iron ore prices and the AUD.
  2. RBA's Hawkish Hold:

    • The RBA maintained its cash rate at 4.35%, adopting a hawkish tone.
    • The statement emphasized a focus on achieving sustainable inflation within the 2-3% target band, dismissing temporary drops due to government relief measures.
    • The RBA highlighted trimmed mean inflation as a key indicator of inflation momentum.
  3. Upcoming CPI Data:

    • The August CPI data is expected to show headline inflation falling within the RBA’s target band for the first time in nearly three years, further influencing market sentiment.

Conclusion:

The combination of supportive measures from the PBoC and a hawkish stance from the RBA has contributed to the AUD's strength. Investors are advised to focus on upcoming inflation data, particularly the trimmed mean measure, to gauge future movements in the AUD.

Source:
Crédit Agricole Research/Market Commentary

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