Westpac RBA Call Knocks AUD, NZD Knee-Jerk Reacts To RBNZ MonPol Decision

AUD took a beating as Westpac said they now expect the RBA to deliver cuts across the cash rate, 3-year yield target and new drawdowns of its TFF to 0.10% from 0.25% as soon as in Oct. The change to their call came just one day after NAB said they forecast 15bp cuts across the three aforementioned rates in Oct or Nov. AUD/USD dived past Aug 20 low of $0.7136, reinforcing the developing bearish set-up. AUD/JPY sank through the round figure of Y75.00, narrowing in on its 100-DMA.

• NZD shot higher amid what looked like short-covering upon the announcement of the RBNZ's monetary policy decision, before paring gains. The MPC left the OCR and LSAP settings unchanged, while reiterating its current forward guidance. At the same time, members expressed preference for deploying a Funding for Lending Programme before year-end, noting that alternative MonPol tools can be used independently. Meanwhile, AUD weakness spilled over into NZD limiting the kiwi to some degree.
• Another softer than expected PBoC fix weighed on the yuan, with China's central bank seemingly looking to send markets a message. USD/CNH erased yesterday's losses and tested the CNH6.8 mark.
• The greenback was well bid and outperformed its G10 peers, with the DXY extending gains to a fresh eight-week high. Regional players digested yesterday's comment from Fed's Evans that the Fed could hike rates before inflation averages 2%, while Dems, Reps & White House struck a stopgap funding deal.
• USD/JPY continued to move away from a multi-month low printed on Monday as Japan returned from a long weekend. The yen paid little attention to BoJ Gov Kuroda's remark that a stable FX rate would be desirable and a denial that he discussed FX matters with Japan's new PM Suga.
• MYR slipped as opposition leader Anwar said that PM Muhyiddin has lost parliamentary majority and he is ready to build the new gov't.
• PMI readings from across the globe, German GfK Consumer Confidence, comments from ECB's de Cos and a flurry of Fedspeak take focus today. Fed speakers include Chair Powell, Mester, Evans, Rosengren, Kashkari, Bostic, Daly and Quarles.