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3 Mar 2015
Australian debt market pricing in 50bp of cuts over the next 12m – GrowthAces
FXStreet (Barcelona) - The GrowthAces Research Team, comments on the RBA’s rate decision, expecting the central bank to cut rates in May if macro data remains weak, and further maintains a long position on AUD/USD, targeting 0.8020 levels.
Key Quotes
“The RBA left the door open for rate cuts at forthcoming meetings. The RBA said in a brief statement: “Further easing of policy may be appropriate over the period ahead. The Board will further assess the case for such action at forthcoming meetings”.”
“In our opinion the statement was intended to limit upward pressure on the AUD.”
“Investors are still pricing in at least one more cut by the RBA, though the implied probability of a move in April shrank to around 60%, from near 100% previously.”
“The debt market still has 50 basis points worth of cuts priced in over the next 12 months.”
“In our baseline scenario there will be no rate cuts this year. However, we do not exclude one more cut (probably in May after the release of CPI for the first quarter on April 22) if macroeconomic data remain weak.”
“The AUD/USD rose on Tuesday as the market trimmed crowded bearish positions after the Reserve Bank of Australia surprised some by not cutting interest rates at its monthly policy meeting. The AUD/USD reached a session high of 0.7845.”
“Our forecast for no change in RBA rates and gradual improvement of global economic activity resulting in higher commodities prices make us stay AUD/USD long. The target of our long position is 0.8020, just below the resistance of 0.8025 (daily high on January 28).”
Key Quotes
“The RBA left the door open for rate cuts at forthcoming meetings. The RBA said in a brief statement: “Further easing of policy may be appropriate over the period ahead. The Board will further assess the case for such action at forthcoming meetings”.”
“In our opinion the statement was intended to limit upward pressure on the AUD.”
“Investors are still pricing in at least one more cut by the RBA, though the implied probability of a move in April shrank to around 60%, from near 100% previously.”
“The debt market still has 50 basis points worth of cuts priced in over the next 12 months.”
“In our baseline scenario there will be no rate cuts this year. However, we do not exclude one more cut (probably in May after the release of CPI for the first quarter on April 22) if macroeconomic data remain weak.”
“The AUD/USD rose on Tuesday as the market trimmed crowded bearish positions after the Reserve Bank of Australia surprised some by not cutting interest rates at its monthly policy meeting. The AUD/USD reached a session high of 0.7845.”
“Our forecast for no change in RBA rates and gradual improvement of global economic activity resulting in higher commodities prices make us stay AUD/USD long. The target of our long position is 0.8020, just below the resistance of 0.8025 (daily high on January 28).”