Goldman Sachs: RBA Likely To End YCC, Looking For AUD/CAD Short Entry

Goldman Sachs note that "front-end yields have propelled higher in Australia - consistent with the broader trend seen across G10 markets in recent weeks - testing the RBA's commitment to yield curve control and pulling forward expectations for liftoff ahead of the upcoming meeting."

• "Given the bank's decision not to defend the yield target, our economists now expect the RBA to officially drop its YCC policy on November 2. Thus, the risks around the meeting appear skewed in a hawkish direction as the Bank has limited options to forcefully push back against market pricing."
• "That said, with core inflation still below the 2.5% target and wage growth more subdued than the RBA's 3-4% criteria for liftoff, we expect the RBA to remain a laggard in the medium-run in terms of liftoff relative to other G10 central banks. Combined with our commodity strategists' bullish oil and bearish iron ore forecasts, AUD/CAD downside could become an attractive opportunity once the tactical risk event has passed."