28 Apr 2015
RBA rate cut expectations continue to get pared back – RBS
FXStreet (Barcelona) - Brian Mangwiro, Markets Strategist at RBS, provides an update regarding the market pricing for the RBA rate cut, noting that the probability of easing has dropped to 50% from 80% a fortnight ago, with markets my anticipating a 25bp cut in August.
Key Quotes
“The probability of easing at next week’s meeting is now at 50%, down from 80% a fortnight ago. Although Gov. Stevens stated that a rate cut ‘will be on the table’ (for discussion) at the May policy meeting (and he speaks again tonight), it seems that a better-than-expected March employment report and a sturdy Q1 CPI print weighed on expectations.”
“Levered players have reduced their short positions on AUD, but still close to record highs.”
“We could see further short covering into next week’s policy meeting as more RBA watchers scale back their expectations.”
“A full 25bp cut is now only fully priced out of the Aug’15 RBA meeting. Compared to last week, ~9bp of cuts have been priced out of Q3. Overall, the market is still priced for around 2x 25bp cuts into year end.”
Key Quotes
“The probability of easing at next week’s meeting is now at 50%, down from 80% a fortnight ago. Although Gov. Stevens stated that a rate cut ‘will be on the table’ (for discussion) at the May policy meeting (and he speaks again tonight), it seems that a better-than-expected March employment report and a sturdy Q1 CPI print weighed on expectations.”
“Levered players have reduced their short positions on AUD, but still close to record highs.”
“We could see further short covering into next week’s policy meeting as more RBA watchers scale back their expectations.”
“A full 25bp cut is now only fully priced out of the Aug’15 RBA meeting. Compared to last week, ~9bp of cuts have been priced out of Q3. Overall, the market is still priced for around 2x 25bp cuts into year end.”