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3 Jun 2014
How AUD reacts on RBA days in 2014? - Westpac
FXStreet (Bali) - Sean Callow, FX Strategist at Westpac, shares his take on today's busy Asian calendar.
Key Quotes
"Australia’s data calendar ahead of the RBA meeting is again very crowded (all at 11:30am Syd/9:30am Sing/HK). Most sensitive for AUD is likely to be April retail sales. Consumer spending was strong from Sep13 to Jan14 but has since faltered, rising just 0.3% in Feb, 0.1% in Mar, when spending outside food was generally quite weak. Consumer sentiment fell sharply in April as media predicted harsh measures in the May budget, which might also hurt Apr spending. Westpac’s 0.3% m/m forecast is in line with consensus, with the unusually close timing of Easter and ANZAC Day posing a wildcard."
"The Q1 balance of payments report should show a sharp narrowing in the current account deficit to around –AUD7bn from -10.1bn in Q4, which would represent a modest -1.8% of GDP. The sharp rise in export volumes driving this move should help produce a hefty 0.9ppt net exports contribution to GDP (median 0.8)."
"The public finances report is not on most calendars but is important, with public demand accounting for about 22% of GDP. Given that this series is difficult to forecast, it is another important piece of the GDP jigsaw. We look for -0.8% q/q after a somewhat surprising 1.1% bounce in Q4. Our GDP forecast will be finalized after these releases; ahead of them it is 0.9% q/q, 3.2% y/y with downside risks."
"There is again no tension around the RBA’s decision on the 2.5% cash rate (2:30pm Syd/12:30pm Sing/HK), with the key phrase likely to be repeated: “the most prudent course is likely to be a period of stability in interest rates.” The RBA is likely to be content that the housing market recovery is intact and that unemployment has peaked. But the slide in consumer sentiment around the Budget will be a concern and there may be some concern that AUD TWI is diverging too far from falling commodity prices. The standard language is to note that the “exchange rate remains high by historical standards” and to refer to its impact on rebalancing the economy medium term. What would hit AUD hard would be the return of the declaration that AUD is “uncomfortably high”. At 5 of the past 6 RBA announcements, AUD/USD has fallen over the subsequent 30 minutes, though only modestly each time (the one rise – Feb – was substantial)."
"In Asia we will see the final reading on China’s May manufacturing PMI from HSBC/Markit (11:45am Syd/9:45am local), with the ‘flash’ estimate 49.7, up from 48.1. Taiwan’s equivalent survey is also due. Expectations for the Reserve Bank of India policy rates are unanimous, keeping the repo rate at 8.00%, but the statement should be worth noting."
Key Quotes
"Australia’s data calendar ahead of the RBA meeting is again very crowded (all at 11:30am Syd/9:30am Sing/HK). Most sensitive for AUD is likely to be April retail sales. Consumer spending was strong from Sep13 to Jan14 but has since faltered, rising just 0.3% in Feb, 0.1% in Mar, when spending outside food was generally quite weak. Consumer sentiment fell sharply in April as media predicted harsh measures in the May budget, which might also hurt Apr spending. Westpac’s 0.3% m/m forecast is in line with consensus, with the unusually close timing of Easter and ANZAC Day posing a wildcard."
"The Q1 balance of payments report should show a sharp narrowing in the current account deficit to around –AUD7bn from -10.1bn in Q4, which would represent a modest -1.8% of GDP. The sharp rise in export volumes driving this move should help produce a hefty 0.9ppt net exports contribution to GDP (median 0.8)."
"The public finances report is not on most calendars but is important, with public demand accounting for about 22% of GDP. Given that this series is difficult to forecast, it is another important piece of the GDP jigsaw. We look for -0.8% q/q after a somewhat surprising 1.1% bounce in Q4. Our GDP forecast will be finalized after these releases; ahead of them it is 0.9% q/q, 3.2% y/y with downside risks."
"There is again no tension around the RBA’s decision on the 2.5% cash rate (2:30pm Syd/12:30pm Sing/HK), with the key phrase likely to be repeated: “the most prudent course is likely to be a period of stability in interest rates.” The RBA is likely to be content that the housing market recovery is intact and that unemployment has peaked. But the slide in consumer sentiment around the Budget will be a concern and there may be some concern that AUD TWI is diverging too far from falling commodity prices. The standard language is to note that the “exchange rate remains high by historical standards” and to refer to its impact on rebalancing the economy medium term. What would hit AUD hard would be the return of the declaration that AUD is “uncomfortably high”. At 5 of the past 6 RBA announcements, AUD/USD has fallen over the subsequent 30 minutes, though only modestly each time (the one rise – Feb – was substantial)."
"In Asia we will see the final reading on China’s May manufacturing PMI from HSBC/Markit (11:45am Syd/9:45am local), with the ‘flash’ estimate 49.7, up from 48.1. Taiwan’s equivalent survey is also due. Expectations for the Reserve Bank of India policy rates are unanimous, keeping the repo rate at 8.00%, but the statement should be worth noting."