Following yesterday’s weaker employment data out of Australia, local banks there have been adjusting their interest rate forecasts. The latest has been National Australia Bank, which now sees a rate cut at both the October and December meetings, which would bring the benchmark rate to 0.5%. Yesterday, after the data, Commonwealth Bank had said it had brought forward its prediction for the next 25 bps rate cut to October. Last month it had forecast rate cuts in November this year and February next year.
Current market pricing is suggesting a more than 80% chance of a 25 bps cut to 0.75% at the October 1 meeting.
Heightened talk of RBA cuts has put pressure on the Australian dollar, with AUD/USD facing a third day of declines as it head toward the 61.8% Fibonacci retracement of the September 3-12 rally at 0.6766. AUD/JPY is down 0.2% at 73.31, facing losses for a fifth straight day. The FX pair is now down 1.6% from the near-term peak a week ago and is testing the 38.2% Fibonacci retracement of the September 3-13 rally at 73.198.