13 Dec 2013
Behind RBA Stevens headline, what was really said?
FXstreet.com (Bali) - The Australian Dollar got completely annihilated on Thursday, with a sensationalist headline from the Australian Financial Review, noting ‘We need a dollar close to US85¢: Stevens‘, causing a major 1 cent+ sell-off in the currency.
Behind the AUD-negative headlines
If one is to read the original transcript of the interview, it is worth highlighting that Stevens omitted the headline statement, instead, it said:
Stevens: "I am not – you know, I’m not going to sit here and put numbers on these things. I don’t think the extent of our knowledge about what’s correct is that good, but I did think 95 was rather too high. I thought 85 would be closer to the mark than 95 at the time we started to make some comments some months ago, but, really, I don’t think we can be that precise. I just think that if things over the medium term evolve as we’re presently assuming – and I think it’s reasonable to make these assumptions – it’s going to be surprising if a nine at the front is the right number." On his comments, Stevens even said that they prefer AUD weaker than lower rates, in theory a hawkish signal - as it telegraphs they are not looking to cut - but it was completely shrugged off by market participants.
Last 24h of AUD selling tells a lot about current sentiment
The selling hysteria towards the Australian Dollar proves how effective the power of headlines can be, but most importantly, if it comes combined with an utter depressed mood to hold the currency, one gets as an outcome the sharp falls we are seeing at the moment, and looks like it may not be over - lack of bounces suggests market may feel comfortable to engage in follow through -. Lastly, readers should be reminded that Thursday's upbeat jobs in Australia acting as the perfect excuse to sell Aussies was yet again additional evidence on AUD bearish sentiment.
Behind the AUD-negative headlines
If one is to read the original transcript of the interview, it is worth highlighting that Stevens omitted the headline statement, instead, it said:
Stevens: "I am not – you know, I’m not going to sit here and put numbers on these things. I don’t think the extent of our knowledge about what’s correct is that good, but I did think 95 was rather too high. I thought 85 would be closer to the mark than 95 at the time we started to make some comments some months ago, but, really, I don’t think we can be that precise. I just think that if things over the medium term evolve as we’re presently assuming – and I think it’s reasonable to make these assumptions – it’s going to be surprising if a nine at the front is the right number." On his comments, Stevens even said that they prefer AUD weaker than lower rates, in theory a hawkish signal - as it telegraphs they are not looking to cut - but it was completely shrugged off by market participants.
Last 24h of AUD selling tells a lot about current sentiment
The selling hysteria towards the Australian Dollar proves how effective the power of headlines can be, but most importantly, if it comes combined with an utter depressed mood to hold the currency, one gets as an outcome the sharp falls we are seeing at the moment, and looks like it may not be over - lack of bounces suggests market may feel comfortable to engage in follow through -. Lastly, readers should be reminded that Thursday's upbeat jobs in Australia acting as the perfect excuse to sell Aussies was yet again additional evidence on AUD bearish sentiment.