AUD Price at Risk to Political Uncertainty, Fed Bets, BoC Rate Hike

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Australian Dollar Fundamental Forecast: Bearish

  • Australian Dollar declined despite jobs report as FOMC minutes overshadowed key risk
  • Australia’s Prime Minister faces by-election, hung parliament may see AUD gap Monday
  • US GDP beat, Fed policy bets and BoC rate hike leaves the Australian Dollar vulnerable

We recently released our 4Q forecasts for equities in the DailyFX Trading Guides page

Despite the lowest Australian unemployment rate since 2012, the Aussie Dollar pared gains on the announcement within 24 hours of the data release. For one thing, the labor force participation rate fell, hinting that unemployment declined for perhaps the wrong reasons. Moreover, an RBA that is patient before raising rates undermines the impact of domestic economic data towards monetary policy expectations.

Rather, the pro-risk Australian Dollar declined along with a deterioration in market mood following hawkish FOMC meeting minutes. Those reignited Fed rate hike bets after they were depressed earlier in October by the global stock market selloff. This speaks directly to what

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