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4 Aug 2014
RBA may be somewhat less dovish - RBS
FXStreet (Bali) - RBA may be somewhat less dovish, and data in Australia more positive this week, notes Greg Gibbs, FX Strategist at RBS.
Key Quotes
"The RBA monthly policy decision (Tuesday, 5-Aug) and quarterly monetary policy statement (Friday, 8-Aug) are released this week along with a raft of activity data."
"Since May, arguably, the RBA has had a soft easing bias, but with a strong preference to keep rates on hold for a long period. Since its first policy decision this year in February, the RBA has concluded its monthly policy press release with, “On present indications, the most prudent course is likely to be a period of stability in interest rates.”
"There is no reason to expect this steady policy guidance to change this month, in my view. However, since May, the RBA’s forecasts and commentary imply risks still lie towards lower inflation and higher unemployment and thus further policy easing. In particular, the RBA has coupled its sub-trend growth and subdued inflation outlook with more strident jawboning of the AUD."
"On 3 July, two days after the last RBA policy decision, RBA Governor Stevens described the AUD as “over-valued, and not by just a few cents” (when it was trading near 0.95). Since then the AUD has been essentially capped, in part due to the more strident rhetoric by the RBA Governor."
"The RBA’s view on the domestic economy may have been coloured to some extent by its desire to talk the currency lower. It has leaned somewhat towards a more conservative view of growth, particularly in its non-resources investment outlook, so as to keep the market’s focus on the dangers a further rise in the AUD may have to this more fragile part of the economy."
"The market appears to be listening, leaving the AUD in a tame range, pricing in some chance of rate cuts, and pushing out the next tightening cycle further into the future."
Key Quotes
"The RBA monthly policy decision (Tuesday, 5-Aug) and quarterly monetary policy statement (Friday, 8-Aug) are released this week along with a raft of activity data."
"Since May, arguably, the RBA has had a soft easing bias, but with a strong preference to keep rates on hold for a long period. Since its first policy decision this year in February, the RBA has concluded its monthly policy press release with, “On present indications, the most prudent course is likely to be a period of stability in interest rates.”
"There is no reason to expect this steady policy guidance to change this month, in my view. However, since May, the RBA’s forecasts and commentary imply risks still lie towards lower inflation and higher unemployment and thus further policy easing. In particular, the RBA has coupled its sub-trend growth and subdued inflation outlook with more strident jawboning of the AUD."
"On 3 July, two days after the last RBA policy decision, RBA Governor Stevens described the AUD as “over-valued, and not by just a few cents” (when it was trading near 0.95). Since then the AUD has been essentially capped, in part due to the more strident rhetoric by the RBA Governor."
"The RBA’s view on the domestic economy may have been coloured to some extent by its desire to talk the currency lower. It has leaned somewhat towards a more conservative view of growth, particularly in its non-resources investment outlook, so as to keep the market’s focus on the dangers a further rise in the AUD may have to this more fragile part of the economy."
"The market appears to be listening, leaving the AUD in a tame range, pricing in some chance of rate cuts, and pushing out the next tightening cycle further into the future."