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3 Jun 2014
Risk RBA will add more aggressive AUD rhetoric - RBS
FXStreet (Bali) - Greg Gibbs, FX Strategist at RBS, continues to see risks downside risks on the AUD.
Key Quotes
Slumping iron ore prices have chipped away at confidence in the Australian mining sector.
Preventing it from spilling over into a deeper fall in the AUD at this stage is, in our view, confidence that Chinese policy makers will underpin economic growth and steel demand. However, nerves will remain over the property market downturn in China.
The RBA may highlight that the stable AUD in recent months is less helpful for rebalancing the economy when commodity prices have been falling.
We see risk that the RBA will add something in its policy statement later today noting that the stable, higher level of the AUD contributes to a weaker economic outlook when Australian commodity prices have fallen significantly over the past month.
This could contribute a bit to further weakness in the AUD, especially as the building approvals data and house price data were weaker than expected (released on Monday).
We continue to favour a further recovery in the USD on improving yield spreads. Eurozone growth appears to have stalled at levels well below potential and inflation is still falling.
On the other hand, US employment data this week may continue to reveal steady recovery bringing closer higher rates in the US.
Key Quotes
Slumping iron ore prices have chipped away at confidence in the Australian mining sector.
Preventing it from spilling over into a deeper fall in the AUD at this stage is, in our view, confidence that Chinese policy makers will underpin economic growth and steel demand. However, nerves will remain over the property market downturn in China.
The RBA may highlight that the stable AUD in recent months is less helpful for rebalancing the economy when commodity prices have been falling.
We see risk that the RBA will add something in its policy statement later today noting that the stable, higher level of the AUD contributes to a weaker economic outlook when Australian commodity prices have fallen significantly over the past month.
This could contribute a bit to further weakness in the AUD, especially as the building approvals data and house price data were weaker than expected (released on Monday).
We continue to favour a further recovery in the USD on improving yield spreads. Eurozone growth appears to have stalled at levels well below potential and inflation is still falling.
On the other hand, US employment data this week may continue to reveal steady recovery bringing closer higher rates in the US.