5 Nov 2013
What to expect from the RBA today?
FXstreet.com (Barcelona) - The Reserve Bank of Australia monetary policy meeting is the focus in Asia, likely to drive the AUD sentiment for the rest of the week, amid null expectations of a rate cut yet still high risk of talking down the Aussie.
Consensus, as measured by the swap rates market, appears to be that the RBA comfortable holding rates steady at 2.5%, with the case to remain neutral strengthened after recent improved data releases in manufacturing, sentiment as well as growing concerns that Australia's housing sector is getting into an obvious bubble, as reflected by surging prices in recent auctions.
According to ANZ Economists, quoted by Dow Jones: "Recent data is showing monetary policy working its magic with signs of strengthening in residential building activity and retail spending, although the RBA will be concerned by the lack of evidence of a generalized strengthening in business investment."
While the RBA's rate reduction cycle is probably over, the big question mark continues to be how will the Central Bank be able to keep the pressure on further AUD downside while keeping risks of a threatening housing bubble relatively low, even if policymakers at the helm of the RBA have been showing little signs of concern so far.
Greg Gibbs, FX Strategist at RBS, notes: "Recent comments by RBA Glenn Stevens that described the AUD as “unusually high” before its recent rally from around 90cents, suggests that the policy statement will emphasis downside risks to the economy form a high exchange rate. However, most activity and sentiment surveys since the last meeting have continued their recent improvement, and the CPI since the last meeting was above expected, so there is no way this statement can be more dovish."
Balancing out all the pros and cons, Gibbs thinks that "the AUD now looks low relatively the improvement in its yield advantage over the USD recently and thus we continue to see upside potential near term."
As a reminder, in the last RBA meeting, the neutral rate statement could read: "At today's meeting, the Board judged that the setting of monetary policy remained appropriate." Meanwhile, the RBA minutes referring to the Oct 1 policy decision, further insights were provided, after the statement read: "Members agreed that the Bank should again neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them."
Consensus, as measured by the swap rates market, appears to be that the RBA comfortable holding rates steady at 2.5%, with the case to remain neutral strengthened after recent improved data releases in manufacturing, sentiment as well as growing concerns that Australia's housing sector is getting into an obvious bubble, as reflected by surging prices in recent auctions.
According to ANZ Economists, quoted by Dow Jones: "Recent data is showing monetary policy working its magic with signs of strengthening in residential building activity and retail spending, although the RBA will be concerned by the lack of evidence of a generalized strengthening in business investment."
While the RBA's rate reduction cycle is probably over, the big question mark continues to be how will the Central Bank be able to keep the pressure on further AUD downside while keeping risks of a threatening housing bubble relatively low, even if policymakers at the helm of the RBA have been showing little signs of concern so far.
Greg Gibbs, FX Strategist at RBS, notes: "Recent comments by RBA Glenn Stevens that described the AUD as “unusually high” before its recent rally from around 90cents, suggests that the policy statement will emphasis downside risks to the economy form a high exchange rate. However, most activity and sentiment surveys since the last meeting have continued their recent improvement, and the CPI since the last meeting was above expected, so there is no way this statement can be more dovish."
Balancing out all the pros and cons, Gibbs thinks that "the AUD now looks low relatively the improvement in its yield advantage over the USD recently and thus we continue to see upside potential near term."
As a reminder, in the last RBA meeting, the neutral rate statement could read: "At today's meeting, the Board judged that the setting of monetary policy remained appropriate." Meanwhile, the RBA minutes referring to the Oct 1 policy decision, further insights were provided, after the statement read: "Members agreed that the Bank should again neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them."