Talking Points:
- The Aussie fell 0.32 percent against the US Dollar
- China Business Sentiment fell 8.4% in September
- China Sentiment gauge leads to RBA policy bets
The Australian Dollar fell nearly 0.32 percent against its US counterpart as MNI September Business Indicator for China led to RBA rate cut speculation. The gauge of Chinese executives’ current sentiment fell to 51.3 in September, down from 56.0 in August. Future expectations likewise deteriorated, with a measure of the forward-looking outlook dropping to the lowest level since at least 2007. MNI warned that sentiment’s unresponsiveness to recent stimulus – including a rate cut and currency devaluation – warns that “firms are losing faith that the current path of easing is sufficient.”
The Aussie Dollar fell alongside front-end government bond yields, hinting that the MNI print may have fueled RBA rate cut speculation. China is Australia’s top trading partner. Consequently, a slowdown there may weigh on Australian growth and inflation, spurring the central bank into action. Traders’ priced-in expectations call for at least one 25bps rate cut over the coming year, though the probability of easing at the next meeting on October 6 is seen at just 26 percent.
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