3 Sep 2013
What to expect from the RBA?
FXstreet.com (Barcelona) - The market is pricing a 4% chance of a cut today, with the RBA being categorical last month saying no immediate rate cut followup.
Key quote by the RBA last policy meeting on Aug 6 was: "Members agreed that the Bank should neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates further".
The RBA, on Aug 6, also said, there is further room to cut rates, by noting "inflation outlook could provide some scope to ease policy further, should that be required to support demand." However, on the Aug 20 minutes, the line "inflation outlook may provide some scope for further easing…” was omitted from the release.
The RBA have also made clear that going forward, since rates are starting to work through the economy, any additional cut will be directly linked to upcoming domestic data and path of the $A.
Last week, RBA board member John Edwards, said the Aussie dollar remains still too high, a fresh reminder of the RBA line of thinking, perceiving the AUD as still too high to help the economic transition in the economy.
To sum up, the RBA will not/can not abandon the easing bias narrative if they are to protect a lower $A, thus while rate cuts may not be imminent - latest data indicators more upbeat -, which gives room for the AUD to bounce off depressed sub 0.90 levels, the wide market perception is that any recovery will be short-lived and will offer value to sell on strength at higher levels. At the moment, the main value areas to sell from are spotted at 0.9040/60, 0.9130/40 ahead of 0.9220/30.
Key quote by the RBA last policy meeting on Aug 6 was: "Members agreed that the Bank should neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates further".
The RBA, on Aug 6, also said, there is further room to cut rates, by noting "inflation outlook could provide some scope to ease policy further, should that be required to support demand." However, on the Aug 20 minutes, the line "inflation outlook may provide some scope for further easing…” was omitted from the release.
The RBA have also made clear that going forward, since rates are starting to work through the economy, any additional cut will be directly linked to upcoming domestic data and path of the $A.
Last week, RBA board member John Edwards, said the Aussie dollar remains still too high, a fresh reminder of the RBA line of thinking, perceiving the AUD as still too high to help the economic transition in the economy.
To sum up, the RBA will not/can not abandon the easing bias narrative if they are to protect a lower $A, thus while rate cuts may not be imminent - latest data indicators more upbeat -, which gives room for the AUD to bounce off depressed sub 0.90 levels, the wide market perception is that any recovery will be short-lived and will offer value to sell on strength at higher levels. At the moment, the main value areas to sell from are spotted at 0.9040/60, 0.9130/40 ahead of 0.9220/30.