2 Jul 2013
RBA next: Impact on the AUD/USD
FXstreet.com (Barcelona) - The Reserve Bank of Australia is just 1h away - 4.3GMT - from publishing its latest monetary policy decision, one in which the market expects rates to stay on hold at current levels of 2.75%. Chances of a rate cut are priced only at 20%, which suggest the low expectations for the easing cycle to resume today.
Analysts at major bank appear to agree on their calls this time around, with consensus for rates on hold and retain dovish bias. According to NAB: "There is little expectation of a rate cut by the RBA, but all interest will be in the tone of the commentary in the press release." Meanwhile, HSBC expects RBA to hold fire at 2.75% on cheaper AUD and uncertainty about where it will settle, which may set inflation risk slightly up.
According to Valeria Bednarik, Chief Analyst at FXstreet.com, "It seems the RBA will do little to bring some relief to the commodity currency as the deterioration in Australia’s external balance points for further action coming from the Central Bank." However, the decision to cut rates this month would be a shocker for the market, which sees the sharp decline in AUD value as a comforting event for the RBA, which has more room to pause and think until re-adjusting its rate again.
Bednarik believes that "If the RBA remains on hold, or inclines to a more optimistic outlook, the Aussie will likely advance some, but a reversal of the bearish trend is quite too far away." On the flip side, a rate cut, along with a dovish stance from governor Stevens, "will only fuel the dominant trend, sending AUD lower across the board and dragging NZD with it."
Sean Callow, FX Strategist at Westpac, expects the statement to retain a variation on the familiar line that there is “some scope for further easing”, in which case, "AUD/USD should see only a small bounce, perhaps 30-40 pips" Callow said. Westpac looks for the next cut to be in August, "after the Q2 CPI (24 Jul) provides a fresh 'all clear'" Callow concluded.
From a technical perspective, if the market eventually turns higher, according to Sean Lee, Founder at FXWW, "0.9280 will be key from a psychological perspective and if the bulls regain it then I would revert to dip-buying mode."
Analysts at major bank appear to agree on their calls this time around, with consensus for rates on hold and retain dovish bias. According to NAB: "There is little expectation of a rate cut by the RBA, but all interest will be in the tone of the commentary in the press release." Meanwhile, HSBC expects RBA to hold fire at 2.75% on cheaper AUD and uncertainty about where it will settle, which may set inflation risk slightly up.
According to Valeria Bednarik, Chief Analyst at FXstreet.com, "It seems the RBA will do little to bring some relief to the commodity currency as the deterioration in Australia’s external balance points for further action coming from the Central Bank." However, the decision to cut rates this month would be a shocker for the market, which sees the sharp decline in AUD value as a comforting event for the RBA, which has more room to pause and think until re-adjusting its rate again.
Bednarik believes that "If the RBA remains on hold, or inclines to a more optimistic outlook, the Aussie will likely advance some, but a reversal of the bearish trend is quite too far away." On the flip side, a rate cut, along with a dovish stance from governor Stevens, "will only fuel the dominant trend, sending AUD lower across the board and dragging NZD with it."
Sean Callow, FX Strategist at Westpac, expects the statement to retain a variation on the familiar line that there is “some scope for further easing”, in which case, "AUD/USD should see only a small bounce, perhaps 30-40 pips" Callow said. Westpac looks for the next cut to be in August, "after the Q2 CPI (24 Jul) provides a fresh 'all clear'" Callow concluded.
From a technical perspective, if the market eventually turns higher, according to Sean Lee, Founder at FXWW, "0.9280 will be key from a psychological perspective and if the bulls regain it then I would revert to dip-buying mode."