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Rise in USD not likely to change RBA policy – Westpac

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 23, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    Bill Evans, Chief Economist at Westpac, notes that the Minutes of the March monetary policy meeting of the Board of the RBA provided no real surprises.

    Key Quotes

    “When we assessed the Governor’s statement following the March meeting we pointed out
    that the key sentence “Members noted that continued low inflation would provide scope to ease monetary policy further, should that be appropriate to lend support to demand” had been changed from the February statement to include the word “would” instead of “may”. We interpreted that as a clear strengthening of the easing bias.

    We must always be aware that the RBA considers the value of the AUD in terms of the Trade Weighted Index. Even though since the March Board meeting the AUD has risen by 7% from USD 0.715 to USD 0.765 the Trade Weighted Index has risen by only 3.4%. That increase can be partly explained by the 9% rise in the iron ore price and the 17% increase in the oil price, (while Australia is a net importer of oil the close relationship between the oil price and LNG price will make the oil price increasingly important for Australia’s terms of trade as LNG exports gather momentum). For these reasons we do not expect that the current move in the AUD will be laying the foundation for an RBA rate cut.”
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