7 May 2014
RBA remains comfortable with AUD level - Nomura
FXStreet (Bali) - Nomura Economists note that Tuesday's decision to leave the policy rate unchanged by the RBA was consistent with their view of a neutral policy stance, unlikely to change anytime soon, they say.
Key Quotes
"Overall, today’s decision to leave the policy rate unchanged was consistent with our view that the RBA has a neutral policy stance and is unlikely to change its policy rate any time soon. Today’s statement continues to show that the RBA continues to have a positive outlook on the economy, despite the expected drag from resource investment and public spending."
"The release of the Statement on Monetary policy on Friday, 9 May, should provide more details on the outlook for growth and inflation. The absence of alarm or discomfort over the level of the exchange rate is likely the result of growing signs that the non-mining sector is improving, reducing the need for a much weaker currency."
"The market’s reaction to the neutral statement from the RBA was mild, as AUD briefly jumped and the rates market saw a small drop in yields. Both moves appear to have been more related to market positioning than any new information or views, given the market is still waiting for Friday’s monetary policy statement and the federal budget next week."
"On the currency, the RBA reiterated that “the decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months. The exchange rate remains high by historical standards”. This suggests that the RBA remains comfortable with the current level of the exchange rate."
"The OIS curve remains very flat, although since the last meeting it has pushed near-term views on rate moves a little further out. In Figure 1, the OIS curve has no RBA moves priced into the curve until the December meeting, with 2.9bp of rate hikes priced into the curve. The first full hike is not priced in until Q3 2015."
Key Quotes
"Overall, today’s decision to leave the policy rate unchanged was consistent with our view that the RBA has a neutral policy stance and is unlikely to change its policy rate any time soon. Today’s statement continues to show that the RBA continues to have a positive outlook on the economy, despite the expected drag from resource investment and public spending."
"The release of the Statement on Monetary policy on Friday, 9 May, should provide more details on the outlook for growth and inflation. The absence of alarm or discomfort over the level of the exchange rate is likely the result of growing signs that the non-mining sector is improving, reducing the need for a much weaker currency."
"The market’s reaction to the neutral statement from the RBA was mild, as AUD briefly jumped and the rates market saw a small drop in yields. Both moves appear to have been more related to market positioning than any new information or views, given the market is still waiting for Friday’s monetary policy statement and the federal budget next week."
"On the currency, the RBA reiterated that “the decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months. The exchange rate remains high by historical standards”. This suggests that the RBA remains comfortable with the current level of the exchange rate."
"The OIS curve remains very flat, although since the last meeting it has pushed near-term views on rate moves a little further out. In Figure 1, the OIS curve has no RBA moves priced into the curve until the December meeting, with 2.9bp of rate hikes priced into the curve. The first full hike is not priced in until Q3 2015."