Daily Commentary BY THE CURVE TEAM –

RBA Updates

20th of October, 2020

The RBA’s minutes for the October board meeting will follow a speech from the RBA’s assistant Governor Chris Kent.

As has been the case since the September board meeting, RBA updates are increasingly scrutinised. An increased willingness to ease policy further in September by expanding the Term Funding Facility means analysts and markets are looking for clarity on what further easing will look like.

Today’s updates are not expected to deliver anything ground-breaking. Governor Lowe’s speech last week communicated the RBA’s stance, which indicated easing was certainly on the agenda. The timing and extent of the next change is less clear.

Nonetheless, markets have already begun pricing in the anticipated quantitative easing and further fall in the 3-year government bond target.

The 3-year government bond is trading at 0.14% rather than the RBA’s target of 0.25%. Buyers anticipating a reduction of the target to 0.10% have driven the price down.

An expectation of quantitative easing targeting 5-10 year government bonds is evident in a lower exchange rate. Although there are many factors that affect the dollar, recent falls to just over 0.7 against the US are viewed as anticipating of quantitative easing.

Also today are payrolls for the week to October 3. Any employment data from now on will be of great interest as Victoria opens up and JobKeeker payments are pared back.

Josh Stewart

Client Relationship Manager