Annette Beacher, Chief Asia-Pac Macro Strategist at TD Securities, suggests that just as the RBA didn’t flinch during the early 2016 outsized financial market volatility, where the AUD plummeted nearly five big figures to $US0.683, today’s March RBA meeting Minutes reveal a comfortable “wait and see” stance, despite the pickup in the AUD and iron ore price. Key Quotes “A key observation was: “… iron ore prices had increased over the past month … Notwithstanding the recent increases in iron ore prices, bulk commodity prices [TD: including coal] were still about 20 per cent below levels of a year earlier. Oil prices had been volatile over recent months, rising somewhat since the previous meeting but still lower than late last year, which largely reflected the ongoing strength of supply”. Shows that the RBA sees through fluctuations, preferring to focus on the big broader picture. There was a lot more chatter on China this time around, three chunky paragraphs, including many “glass half full” observations: “Members spent part of the meeting discussing some issues relevant to China's longer-run economic performance and the risks to growth. They observed that demographic changes and strong productivity growth had been key drivers of economic growth… but were likely to weigh on future growth as a result.” And “The low level of foreign currency debt differentiated China from other emerging economies that had previously experienced financial crises” and “the scope for Chinese household incomes to rise over time created long-run potential for Australia to increase exports of rural produce and services, including tourism.” Clearly the RBA is standing back from the AUD dip to $US0.683 and we can conclude that it is just as likely to overlook the recent pop to $US0.76. At the 1 March RBA Board meeting, the AUD was $US0.716 and iron ore was $US51.4/t. As Minutes say “The Australian dollar was little changed on a trade-weighted basis and against the US dollar since the previous meeting.” Unchanged at 61.3 then, but is 64.4 now. Wait and see is clear here: “ There had also been further signs of a rebalancing of activity towards non-mining sectors of the economy, aided by the low level of interest rates and the depreciation of the exchange rate over the past couple of years, which had responded to the evolving economic outlook.” And in conclusion, the standard easing bias: “ … new information should allow the Board to assess whether the improvement in labour market conditions was continuing and whether the recent financial turbulence presaged weaker global and domestic demand … continued low inflation would provide scope to ease monetary policy further, should that be appropriate to lend support to demand.” i.e. cut only if it is passed on and supports demand, not targeting the currency. While there is nothing new here and the markets moved on after about three Bloomberg headlines, we see the RBA Board’s patience as key. As AUD trades around $US0.75 ahead of this week’s crucial FOMC meeting, the RBA will smooth over this rally just as it looked over the dip to $US0.683. However, while it has to be said that some USD strength via a FOMC commitment to the lifting Fed funds 2-3 times this year would be most welcome, we don’t see the RBA leaning against this AUD strength in the near-term.” For more information, read our latest forex news.