Central Banks

The RBA meet on Tuesday  November 3 and rate cuts are widely expected:

Expected is:

  • a 15bp rate cut to the cash rate, which will bring it to 0.1% from its current 0.25%
  • also a 15 bp cut to its 3-year yield target and term lending facility (taking these also to 0.1%)
  • a QE programme for the longer bonds, 5-to-10 years

There is more at the preview I posted earlier, link here.

ING have issued a note, this in very brief from it, and they think further QE is more likely than rate cuts.

  • Our preferred approach would be for the RBA to adjust its current yield curve control (YCC), which to be clear, is already a form of constrained Quantitative Easing (QE).

ING add some AUD thoughts:

  • we see the balance of risks clearly skewed to the upside for AUD ahead of the meeting, the vicinity to the first projections for the US election (late European night on 3 November) will likely keep the RBA impact rather short-lived. 
  • AUD can be the key beneficiary of a landslide win by Joe Biden – i.e. the most market-friendly scenario – and would probably be a key underperformer in the market-adverse cases of a contested result or Trump victory.

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