RBA and RBNZ to follow the global central bank trend? - AmpGFX

A number of central banks have exhibited more optimistic outlooks for their economies and moved to a less dovish stance (Fed, BoC, ECB, and BoE) and a common theme across all these central banks is significant more confidence in the strength and breadth of a global economic recovery, points out analysts at Amplifying Global FX Capital. A question many will be pondering is – will the RBA and RBNZ make similar adjustments to their policy bias, they further add.

Key Quotes

“The market was blindsided by the shift to a tightening bias by the Bank of Canada, which has similarities in its housing and commodity exposure to Australia.  The market should be wary of a shift in tone from the RBA at its policy meeting next week.”

“The market has raised its probabilities for rate increases in Australia in recent weeks, reflecting a global trend higher in rates.  Since the 12 June BoC Wilkins speech, where Canadian rates have risen 33bp, Australian 2yr rates have risen by 17bp, still significant, and more than either the US or New Zealand.”

“The RBNZ eschewed its opportunity to shift its bias, maintaining its guidance in its 22 June policy statement; “Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.”  This was an interim meeting between its quarterly MPS, making it less likely that the RBNZ would shift tone.”

“Until recently, the market was still entertaining the possibility that the RBA might cut rates again from its record low 1.5%, this probability has now dwindled to negligible levels and the market sees the risk of hikes coming into view late this year. However, there is only modest a probability implied that the RBA will hike for the next year, and less than a full 25bp of hikes is priced in until end 2018.”