1 May 2015
Market expectations strong for a RBA rate cut in May – Rabobank
FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank, sees a high probability of a RBA action likely in response to the soft fundamentals and building concerns on commodity prices.
Key Quotes
“The RBA policy meeting on May 5 will be the first opportunity by a major central bank to respond to this week’s USD sell off. Since July 2014, dollar strength had been facilitating a welcome loosening in monetary conditions in many parts of the globe.”
“To central banks such as the RBA which are concerned about the impact of further rates cuts in propelling house prices and household debt levels, the near 20% fall in AUD/USD between September 2014 and its February low would have been very well received.”
“The RBA has made it clear on several occasions that it would favour further falls in the value of AUD/USD.”
“For sure, these remarks have cemented the view of the market that the RBA will cut rates on May 5.”
“A Bloomberg survey shows 20 or 28 analysts expect a rate cut from the RBA next week. While the sell-off in the USD has tipped the scale of favour of further easing, the underlying causes of further monetary accommodation stem from concerns about the weakness of Chinese growth and the slump in iron ore and coal prices.”
“Iron ore has managed a slight recovery on the back of news that Vale of Brazil could temporary slow iron ore exports and reports that BHP was to defer spending on its iron ore expansion in West Australia. Insofar as the latter announcement will underpin more general concerns about falling investment and jobs growth, it is of limited comfort.”
“The collapse in metals and energy prices is also forecast to have blown a hole in the government’s estimates of tax revenues. As a consequence, next month’s budget is likely to err on the side of austerity.”
“With little support for growth expected to come from fiscal policies, the case for a RBA interest rate move appears to be even firmer.”
Key Quotes
“The RBA policy meeting on May 5 will be the first opportunity by a major central bank to respond to this week’s USD sell off. Since July 2014, dollar strength had been facilitating a welcome loosening in monetary conditions in many parts of the globe.”
“To central banks such as the RBA which are concerned about the impact of further rates cuts in propelling house prices and household debt levels, the near 20% fall in AUD/USD between September 2014 and its February low would have been very well received.”
“The RBA has made it clear on several occasions that it would favour further falls in the value of AUD/USD.”
“For sure, these remarks have cemented the view of the market that the RBA will cut rates on May 5.”
“A Bloomberg survey shows 20 or 28 analysts expect a rate cut from the RBA next week. While the sell-off in the USD has tipped the scale of favour of further easing, the underlying causes of further monetary accommodation stem from concerns about the weakness of Chinese growth and the slump in iron ore and coal prices.”
“Iron ore has managed a slight recovery on the back of news that Vale of Brazil could temporary slow iron ore exports and reports that BHP was to defer spending on its iron ore expansion in West Australia. Insofar as the latter announcement will underpin more general concerns about falling investment and jobs growth, it is of limited comfort.”
“The collapse in metals and energy prices is also forecast to have blown a hole in the government’s estimates of tax revenues. As a consequence, next month’s budget is likely to err on the side of austerity.”
“With little support for growth expected to come from fiscal policies, the case for a RBA interest rate move appears to be even firmer.”