Goldman Sachs: Cautious Ahead Of RBA Easing

Goldman Sachs note that "Governor Lowe signaled imminent easing in his latest speech, in line with our economists' expectations for a 15bp cut in the target rate and ~A$100bn of QE aimed at reducing longer-term yields. Markets appear to have mostly priced in our expectations at this point, but we think AUD will probably see some additional downside pressure on the decision, particularly if the RBA also cuts the ESA rate from +10bp to zero as we anticipate. As a result, although we have recommended AUD/USD longs, this view could be frustrated by easing expectations ahead of RBA's 2 November meeting. That said, the risk backdrop over the next few weeks could quickly turn more AUD-positive if we remain on track for vaccine approval by year-end and we see a Democratic sweep in the US elections, both likely to become clear before the next RBA meeting in November."