RBA Decision Knocks AUD, USD/CNH 1-Week Implied Vol At Record High As U.S. Election Looms Large

AUD established itself as the worst performer in G10 FX space, following the monetary policy decision from the RBA. The in-line decision to cut the cash rate, 3-Year yield target & TFF rate to 0.1% was coupled with the reduction of the rate applied to ES balances to zero and the announcement of an intention to buy A$100bn worth of ACGBs from the 5-10 Year sector over the next six months (i.e. more aggressive horizon than expected). Furthermore, the Bank tweaked its forward guidance, forecasting no cash rate hikes for at least three years.

• Apart from the RBA decision, news & data flow was light and activity was limited by a market holiday in Japan. Most G10 pairs were happy to hold relatively tight ranges.
• The U.S. election steals the spotlight today, with market jitters reflected in spikes in implied volatilities across multiple USD crosses. Offshore yuan grabbed attention as one-week tenor for USD/CNH surged to the highest level since BBG started running the data series in 2011.
• Spot USD/CNH hugged a fairly narrow range overnight, recouping its initial losses after a softer than expected PBoC fix.
• Elsewhere, focus turns to U.S. factory orders & final durable goods orders, as well as comments from ECB's Knot and Riksbank's Ingves & Breman.