28 Apr 2014
AUD and NZD: To jawbone or not to jawbone - RBS
FXStreet (Bali) - The current stance by central banks all over the world continues to be supportive of currencies with real carry, notes the FX Strategy Team at RBS.
Key Quotes
"A still credibly dovish Fed, heightened expectations for ECB easing, and evidence that US growth is rebounding from weather induced lows (though not enough to make the Fed more hawkish) all remain supportive for global-growth oriented currencies with real carry."
"Officials in Australia and New Zealand did indeed step up their rhetoric against strength in the currency. One RBA member, Edwards, said he would have preferred to see a weaker AUD and press reports have highlighted a rift between the Australian Treasury and the RBA amid a disagreement over the merits of the RBA switching to a neutral policy outlook."
"In Australia, while inflation did come in slightly below market expectations both headline and core inflation are on the topside of the RBA's target range – likely supportive of a still-neutral bias.
The RBNZ, meanwhile, made a clear reference to the strength of the currency and how it could influence their outlook for monetary policy."
"To be sure, this is different from jawboning the currency (the RBNZ opted not to call the currency overvalued at its meeting next week) but the RBNZ has certainly signalled that currency strength may reduce the need to tighten. The RBNZ will release new forecasts in June."
Key Quotes
"A still credibly dovish Fed, heightened expectations for ECB easing, and evidence that US growth is rebounding from weather induced lows (though not enough to make the Fed more hawkish) all remain supportive for global-growth oriented currencies with real carry."
"Officials in Australia and New Zealand did indeed step up their rhetoric against strength in the currency. One RBA member, Edwards, said he would have preferred to see a weaker AUD and press reports have highlighted a rift between the Australian Treasury and the RBA amid a disagreement over the merits of the RBA switching to a neutral policy outlook."
"In Australia, while inflation did come in slightly below market expectations both headline and core inflation are on the topside of the RBA's target range – likely supportive of a still-neutral bias.
The RBNZ, meanwhile, made a clear reference to the strength of the currency and how it could influence their outlook for monetary policy."
"To be sure, this is different from jawboning the currency (the RBNZ opted not to call the currency overvalued at its meeting next week) but the RBNZ has certainly signalled that currency strength may reduce the need to tighten. The RBNZ will release new forecasts in June."