AUD stabilizing with market scaling back RBA cut odds; what's next? - MUFG

Author: Adam Button | Category: News

AUD/USD has done a round trip today

MUFG Research discusses the impact of the this week's AU employment report on the market's expectations for a cut from the RBA at its next month policy meeting.

"The report revealed that employment increased strongly by 29k and the unemployment rate unexpectedly ticked lower by 0.1 point to 5.1% in December. It has prompted the Australian rate market to scale back expectations for an RBA rate cut at their next policy meeting on the 4th February. According to Bloomberg, the probability of a 0.25 point cut being delivered next month has dropped from around 55% to 25% overnight. ," MUFG notes. 

"However, the better than expected Australian employment report is judged as providing only temporary relief...A more sustained improvement in the Australian economic data flow will be required to change the market's view over the need for further RBA rate cuts, and encourage a stronger Australian dollar.

For now the Australian dollar is continuing to stabilize at lower levels between 0.6750 and 0.7050 after adjusting lower throughout most of last year," MUFG adds.

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