2 Jun 2014
RBA: Verbal campaign against high AUD may resume - RBS
FXStreet (Bali) - The RBA may attempt to talk down the AUD again soon, according to Greg Gibbs, FX Strategist at RBS.
Key Quotes
"The market may not be expecting any change in the RBA language on the exchange rate given that it has not changed much in the last two months. However, as discussed above, the Quarterly Statement on Monetary Policy had a somewhat more dovish tone and downgraded GDP forecasts, in part at least due to the higher exchange rate. Furthermore, iron ore prices are sharply lower over the last month. As such, the RBA may now prefer a lower exchange rate more so than a month earlier."
"The RBA, in our view, is clearly not in a mood to cut rates given the strength in the housing market, so if it has a leaning towards easier policy, it is squarely in the frame of attempting to persuade the market to push the AUD lower. It may attempt to do so by introducing new language in the statement on Tuesday next week. The risk is that it highlights the divergence between the AUD and commodity prices, and note that it places greater downside pressure on incomes and the growth outlook."
"In thinking about how the RBA may influence the market's view on the AUD, it could simply drop the first part of its sentence that, "The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy." It could then note that the rise in the AUD over recent months is at odds with the fall in commodity prices and weakens the economic outlook."
"Such a development may see a quick reaction in the currency market and limit any rebound that could occur on what may be firmer GDP and trade data later in the week."
Key Quotes
"The market may not be expecting any change in the RBA language on the exchange rate given that it has not changed much in the last two months. However, as discussed above, the Quarterly Statement on Monetary Policy had a somewhat more dovish tone and downgraded GDP forecasts, in part at least due to the higher exchange rate. Furthermore, iron ore prices are sharply lower over the last month. As such, the RBA may now prefer a lower exchange rate more so than a month earlier."
"The RBA, in our view, is clearly not in a mood to cut rates given the strength in the housing market, so if it has a leaning towards easier policy, it is squarely in the frame of attempting to persuade the market to push the AUD lower. It may attempt to do so by introducing new language in the statement on Tuesday next week. The risk is that it highlights the divergence between the AUD and commodity prices, and note that it places greater downside pressure on incomes and the growth outlook."
"In thinking about how the RBA may influence the market's view on the AUD, it could simply drop the first part of its sentence that, "The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy." It could then note that the rise in the AUD over recent months is at odds with the fall in commodity prices and weakens the economic outlook."
"Such a development may see a quick reaction in the currency market and limit any rebound that could occur on what may be firmer GDP and trade data later in the week."