AUD: Can 3Q wage data revive lost inflation sentiment? - ING

According to analysts at ING, while there were hints of a more cautious outlook in the Nov RBA policy statement, the key takeaway for us is that 'lowflation' looks to be embedded in the central bank's macro projections.

Key Quotes

“The downward revisions to the inflation profiles (both headline and core) are quite striking on the surface of things - though we acknowledge this may be pre-empting a forthcoming update to the CPI basket weights. Still, inflation is expected to remain below the mid-point of the 2-3% target rate over the forecast horizon - which questions the rationale for any near-term policy tightening. Our house view for a 2Q18 RBA rate hike looks at risk of being pushed back.”

“The Oct jobs report (Thu) will be closely watched, but we also expect strong focus on the 3Q wage index (Wed) and Nov consumer inflation expectations (Thu). Any upside here may revive some inflation sentiment in AUD markets. In this scenario, we could see AUD/USD recover meaningfully above the 200-dma (which comes in around the 0.77 handle).”