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AUD rally: It’s complicated – Westpac

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Apr 7, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    Sean Callow, Research Analyst at Westpac, suggests that the optimism over AUD has cooled somewhat.

    Key Quotes

    “The global risk mood soured early in the week despite what seemed to us to be a healthy set of US employment data: robust job creation and an uptick in wages growth but with markets not fearing a Fed rate hike any time soon. Closer to home, Australia’s Feb retail sales data (fl at) didn’t help AUD’s cause but the key event was of course the RBA Board meeting, which offered mixed news for the Aussie.

    On the positive side, the cash rate was kept at 2% where it has been since last May. As in March, “the Board judged that there were reasonable prospects for continued growth in the economy.” But low inflation still provides “scope for easier policy” and as the RBA dropped the neutral language on AUD that was used from Aug 2015 to Mar 2016. Governor Stevens warns that further AUD gains could “complicate” the adjustment to the end of the mining investment boom.

    Pricing for a May rate cut is a wary 35% but this could push towards 50/50 if next Thursday’s jobs data disappoints. The 120k surge in jobs in Oct-Nov is looking even more like statistical noise, being followed by a net -7k over summer. A soft reading would come ahead of what should be muted Q1 inflation data on 27/4, keeping markets pondering a resumption of RBA easing. But our base case remains no RBA easing, while USD is likely to continue to be restrained by Fed chair Yellen’s dovish tone. Risks are still towards AUD/USD0.78 multi-week.”
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