ANZ comments on the Reserve Bank of Australia, the Federal Reserve and AUD/USD

In summary, the main points

RBA has begun a fresh easing cycle

  • we now expect the Fed to follow suit, despite respectable levels of growth in the US

We expect AUD rates will out-perform and the Australian rate structure will remain below the US for the foreseeable future

Absent a more sustained deterioration in financial conditions, the Fed is unlikely to ease as soon as the market hopes.

  • However, the Fed's increased focus on the inflation undershoot means it will have little tolerance for volatility should it manifest

We remain comfortable with our forecast that the AUD will trough at USD0.65 in 2019. Though the upside risks to that have risen a touch.