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RBA Preview: Chances of rate cut low - BBH

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 30, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – Research Team at BBH, suggests that the chances of a rate cut this week are very small, but the risk that the 2.0% cash rate is the bottom of the interest rate cycle has decreased following the unexpectedly large decline in Q3 capital expenditures.

    Key Quotes

    “The 9.2% drop was three-times larger than the Bloomberg consensus forecast, and it is more than twice the drop seen in Q2 (-4.4%). It was the fourth consecutive quarterly decline during which time capex has fallen by more than a fifth.”

    “The transition in China is helping to force a transition in Australia. The combination of low interest rates and a depreciating currency (-15.6% over the past 12 months) is facilitating the transition. Barring a surprise cut, which would likely send the currency back toward $0.7000, Governor Stevens' statement will likely shape the market's reaction. Before the capex data, he was clear that the RBA was on hold into Q1 16.”

    “We think the RBA likely tell investors that there is scope to cut rates again if needed. The market may see this as an increasing the likelihood of a rate in Q1 16.”
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