22 Jan 2014
Flash: Near-term RBA rate cuts out of the picture - Nomura
FXstreet.com (Bali) - Rate cut hopes in Australia are fading after the CPI report, notes Charles St-Arnaud, Economist, and Martin Whetton, Strategist, both from Nomura.
Key Quotes
"Despite our view that growth will remain below trend in coming quarters, which should push the
unemployment rate higher, while AUD reaches new lows, we believe concerns over the housing market will prevent further rate cut."
"The market reaction to the stronger-than-expected CPI was a swift repricing of expectations. In the FX market, AUD/USD jumped over half a cent and continued to see short covering, driving it to 0.8870. The rates market reversed much of the rally that was seen after the weak jobs data, with the futures and swap curve yields rising by 10-15bp over the front end."
"OIS pricing continues to show a small amount of easing priced in to the forward meetings, but the August RBA date at 2.431% (the terminal cash rate point) rose 7.6bp from the lows. We expect to see further repricing of the front end to push near-term rate cuts out of the picture. The 1yr point of the OIS curve has moved from pricing in 5bp of easing to 7bp of tightening on the data
Key Quotes
"Despite our view that growth will remain below trend in coming quarters, which should push the
unemployment rate higher, while AUD reaches new lows, we believe concerns over the housing market will prevent further rate cut."
"The market reaction to the stronger-than-expected CPI was a swift repricing of expectations. In the FX market, AUD/USD jumped over half a cent and continued to see short covering, driving it to 0.8870. The rates market reversed much of the rally that was seen after the weak jobs data, with the futures and swap curve yields rising by 10-15bp over the front end."
"OIS pricing continues to show a small amount of easing priced in to the forward meetings, but the August RBA date at 2.431% (the terminal cash rate point) rose 7.6bp from the lows. We expect to see further repricing of the front end to push near-term rate cuts out of the picture. The 1yr point of the OIS curve has moved from pricing in 5bp of easing to 7bp of tightening on the data