3 Feb 2015
RBA cuts rates to record lows, more to come? – TDS
FXStreet (Barcelona) - Prashant Newnaha, Asia-Pacific Macro Strategist at TD Securities, comments on today’s RBA’s surprising decision to cut rates and its effect on the antipodeans, further adding that markets are pricing in for another rate cut soon.
Key Quotes
“The AUD plumbed to multi year lows again after the RBA cut rates by 25bps to 2.25% with the currency hitting a low of US$0.7649 , down 1.8% today.”
“The AUD remains around these levels and any prospect for a rally, even on short covering has not materialised, with the market betting that the RBA will follow with further rate cuts.”
“At present the market is placing a 55% probability the RBA will move the cash rate to 2% in March, 95% for April while May is pricing in the potential for a 30% cut to 1.75%. Dec IB futures are pricing in ~80% probability the cash rate is cut to 1.75%.”
“In fixed income 3yr and 10yr ACGBs rallied 16bps today, 3yrs at 1.80% and 10yrs 2.28% while the bills underperforming 3yr bonds saw swap spreads widen. NZGBs closed the session 1 bps higher in yield but that was before the RBA decision.”
“That said, the NZD followed closely on the heels of the AUD, down –1.3% to US$0.7205.”
Key Quotes
“The AUD plumbed to multi year lows again after the RBA cut rates by 25bps to 2.25% with the currency hitting a low of US$0.7649 , down 1.8% today.”
“The AUD remains around these levels and any prospect for a rally, even on short covering has not materialised, with the market betting that the RBA will follow with further rate cuts.”
“At present the market is placing a 55% probability the RBA will move the cash rate to 2% in March, 95% for April while May is pricing in the potential for a 30% cut to 1.75%. Dec IB futures are pricing in ~80% probability the cash rate is cut to 1.75%.”
“In fixed income 3yr and 10yr ACGBs rallied 16bps today, 3yrs at 1.80% and 10yrs 2.28% while the bills underperforming 3yr bonds saw swap spreads widen. NZGBs closed the session 1 bps higher in yield but that was before the RBA decision.”
“That said, the NZD followed closely on the heels of the AUD, down –1.3% to US$0.7205.”