12 Feb 2015
Rate cut or not, AUD set to weaken – BTMU
FXStreet (Barcelona) - Derek Halpenny, European Head of GMR at Bank of Tokyo-Mitsubishi UFJ, views that the recent soft Australian data, AUD depreciation and signs of stability in China’s growth will keep the rate cut decision from the RBA as a close call, but overall AUD is set to weaken.
Key Quotes
“the level of domestic demand in Australia remains too weak in order to absorb the rate of expansion in the labour market and that is likely to put downward pressure on wage growth going forward.”
“Of course, the RBA will feel justified in the decision to cut the key official interest rate last week when it explained that the unemployment rate was likely to peak at a level higher than originally expected.”
“The probability of a further rate cut in March has now risen of course and the scale of Australian dollar weakness between the last meeting and the next may well play some role in the decision then. Economic data from China and the price of iron ore will also be important.”
“We have assumed that AUD/USD depreciation and signs of growth stabilising in China would keep the RBA on hold, but like last week, the decision is a close call. Either way, the Australian dollar is set to continue weakening against the US dollar.”
Key Quotes
“the level of domestic demand in Australia remains too weak in order to absorb the rate of expansion in the labour market and that is likely to put downward pressure on wage growth going forward.”
“Of course, the RBA will feel justified in the decision to cut the key official interest rate last week when it explained that the unemployment rate was likely to peak at a level higher than originally expected.”
“The probability of a further rate cut in March has now risen of course and the scale of Australian dollar weakness between the last meeting and the next may well play some role in the decision then. Economic data from China and the price of iron ore will also be important.”
“We have assumed that AUD/USD depreciation and signs of growth stabilising in China would keep the RBA on hold, but like last week, the decision is a close call. Either way, the Australian dollar is set to continue weakening against the US dollar.”