Robert Rennie, head of financial market strategy at Westpac, explains that the AUD went into today's key RBA meeting at circa 0.7000, and has also been under pressure on a TWI basis - indeed the level of the AUD TWI was the lowest on any RBA policy meeting back to 2009.

Key Quotes

“With the meeting priced 40% for a cut and the A$ at multi year lows, we are not surprised by the reasonable jump in the A$ given no change in policy (as Westpac correctly forecast).”

“However, we would still focus on clear signs within the statement that the RBA is paying close attention to inflation data being "noticeably lower than expected" and will be paying close attention "to developments in the labour market at its upcoming meetings."

“We would expect this move in the A$ to continue to push towards 0.7060/80. However, above that level we remain of the view that the A$ is a sell on strength.”

“Finally note that, in a break from recent emphasis, the RBA did note that the A$ "is at the low end of its narrow range of recent times" suggesting that the combination of the recently weaker currency and strong commodity prices is seen as a positive for the Australian economy.”

“This is largely consistent with our own views here noting that our A$ 'fair value' models are close to the lows back to Jan 2016.”