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5 Jan 2015
RBA might cut rates in February – WIB
FXStreet (Barcelona) - Rob Rennie and Sean Callow at Westpac expect the RBA to cut the cast rate in its 3rd February meeting, further noting that the AUD/NZD pair should remain supported this month.
Key Quotes
“As for the RBA outlook, Westpac’s base case is a cash rate cut at the 3 Feb meeting. Before this, however, markets are likely to remain doubtful about the chances of easing as soon as Feb. A cut is fully priced by May 2015 but barely 20% priced by Feb.”
“A decent reading on China Q4 GDP shouldn’t encourage RBA rate cut talk, while Australia’s Q4 CPI (28 Jan) is likely to show that Australian inflation remains on target, rather than undershooting as in NZ. Westpac looks for headline CPI to slip to 1.8% y/y on lower fuel prices but the market focus will be on the core measure which we see around 0.7% q/q, 2.4% y/y, retaining the 2% handle as it has almost without interruption since 2010. As such, 2 year swap spreads should support AUD/NZD this month.”
Key Quotes
“As for the RBA outlook, Westpac’s base case is a cash rate cut at the 3 Feb meeting. Before this, however, markets are likely to remain doubtful about the chances of easing as soon as Feb. A cut is fully priced by May 2015 but barely 20% priced by Feb.”
“A decent reading on China Q4 GDP shouldn’t encourage RBA rate cut talk, while Australia’s Q4 CPI (28 Jan) is likely to show that Australian inflation remains on target, rather than undershooting as in NZ. Westpac looks for headline CPI to slip to 1.8% y/y on lower fuel prices but the market focus will be on the core measure which we see around 0.7% q/q, 2.4% y/y, retaining the 2% handle as it has almost without interruption since 2010. As such, 2 year swap spreads should support AUD/NZD this month.”