3 Feb 2014
Flash: RBA may create upside risk for the rates outlook - RBS
FXstreet.com (Bali) - The RBA statement tomorrow may appear slightly less dovish on the rates outlook, notes Greg Gibbs, FX Strategist at RBS.
Key Quotes
"The RBA may be more comfortable with the AUD, but is still likely to say it is high. It may sound somewhat less dovish on rates in line with higher Q4 inflation, some improvement in business conditions and a surging housing market.
!However, recent soft labour market data and some additional global uncertainty may help keep the rates outlook balanced. We see some upside risk for the AUD and rates on a somewhat less dovish sounding RBA, although the currency will be heavily influenced by the Chinese PMI released over the weekend."
"The RBA typically avoids saying too much in its policy statement. The policy settings the RBA might like involve a still lower AUD, but they are probably increasingly reluctant to cut rates. Of course they realise to keep the AUD low or lower, it can't sound hawkish on rates."
"On balance it will probably prefer to avoid any market reaction and thus may attempt to get away with few wording changes in this statement. However, with a number of developments since December it may come off as disingenuous not making reference to what have been significant developments. On balance these developments suggest the RBA should be less inclined to cut rates and thus this statement may appear as such, creating upside risk for the rates outlook."
Key Quotes
"The RBA may be more comfortable with the AUD, but is still likely to say it is high. It may sound somewhat less dovish on rates in line with higher Q4 inflation, some improvement in business conditions and a surging housing market.
!However, recent soft labour market data and some additional global uncertainty may help keep the rates outlook balanced. We see some upside risk for the AUD and rates on a somewhat less dovish sounding RBA, although the currency will be heavily influenced by the Chinese PMI released over the weekend."
"The RBA typically avoids saying too much in its policy statement. The policy settings the RBA might like involve a still lower AUD, but they are probably increasingly reluctant to cut rates. Of course they realise to keep the AUD low or lower, it can't sound hawkish on rates."
"On balance it will probably prefer to avoid any market reaction and thus may attempt to get away with few wording changes in this statement. However, with a number of developments since December it may come off as disingenuous not making reference to what have been significant developments. On balance these developments suggest the RBA should be less inclined to cut rates and thus this statement may appear as such, creating upside risk for the rates outlook."