7 Apr 2015
Looking for an RBA cut today - Westpac
FXStreet (Bali) - Sean Callow, FX Strategist at Westpac, notes that the bank firmed its call for an April RBA cut last week, after holding an April/May view since the March meeting.
Key Quotes
The highlight of the Australian calendar will be the RBA decision at 2:30pm Syd/12:30pm Sing/HK. While a narrow majority of forecasters are expecting the cash rate to remain at 2.25% this month, almost all see a cut by May and pricing is 77% for a move today.
Westpac firmed its call for an April cut last week, after holding an April/May view since the March meeting. While rates were unchanged in March, the RBA adopted a strong easing bias, saying that “it was appropriate to hold interest rates steady for the time being”.
The qualifier “for the time being” has only been used in eight statements since January 2009, and has been followed by a rate cut in the following month on six of those occasions, and the month after on the other two. Furthermore, since the last meeting, commodity prices have deteriorated further, with spot iron ore prices falling another 25%.
The currency however has fallen only modestly, AUD/USD down only around 2c and AUD TWI -2.8%. We are expecting an easing bias, which would keep pressure on the Aussie, but not another rate cut unless the 2016 growth forecast is revised downwards in May's SoMP.
We will also see Aust Feb retail sales at 11:30am Syd/9:30am Sing/HK. Westpac’s forecast is in line with consensus, another 0.4% gain. While lower petrol prices and lower AUD should continue to be marginal positives, lower income growth should weigh.
Key Quotes
The highlight of the Australian calendar will be the RBA decision at 2:30pm Syd/12:30pm Sing/HK. While a narrow majority of forecasters are expecting the cash rate to remain at 2.25% this month, almost all see a cut by May and pricing is 77% for a move today.
Westpac firmed its call for an April cut last week, after holding an April/May view since the March meeting. While rates were unchanged in March, the RBA adopted a strong easing bias, saying that “it was appropriate to hold interest rates steady for the time being”.
The qualifier “for the time being” has only been used in eight statements since January 2009, and has been followed by a rate cut in the following month on six of those occasions, and the month after on the other two. Furthermore, since the last meeting, commodity prices have deteriorated further, with spot iron ore prices falling another 25%.
The currency however has fallen only modestly, AUD/USD down only around 2c and AUD TWI -2.8%. We are expecting an easing bias, which would keep pressure on the Aussie, but not another rate cut unless the 2016 growth forecast is revised downwards in May's SoMP.
We will also see Aust Feb retail sales at 11:30am Syd/9:30am Sing/HK. Westpac’s forecast is in line with consensus, another 0.4% gain. While lower petrol prices and lower AUD should continue to be marginal positives, lower income growth should weigh.