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3 Jun 2014
RBA notes AUD/commodity price disconnect - Nomura
FXStreet (Bali) - As Nomura Market Research Team pick up from yesterday's RBA policy statement, the central bank is starting to signal some discomfort that AUD may be diverging too much from fundamentals.
Key Quotes
"Overall, Tuesday's decision to leave the policy rate unchanged was consistent with our view that the RBA has a neutral policy stance and is unlikely to change its policy rate any time soon."
Tuesday's statement continues to show that the RBA has maintained its positive outlook on the economy, despite the expected drag from resources investment and public spending. However, given the continued decline in commodity prices, the RBA is starting to signal some discomfort that AUD may be diverging too much from fundamentals."
"The market’s reaction to the neutral statement from the RBA was mild, as AUD briefly jumped and the rates market experienced a small drop in yields. Both moves appear to have been more related to market positioning than any new information or views."
"The OIS curve remains very flat, although since the last meeting it has pushed near-term views on rate moves a little further out. In Figure 2, the OIS curve has small amounts of rate cuts priced into the curve until April 2015, with as much as 3.7bp priced to the lowest point on the rates curve. The first hike is not priced into the curve until Q3 2015."
Key Quotes
"Overall, Tuesday's decision to leave the policy rate unchanged was consistent with our view that the RBA has a neutral policy stance and is unlikely to change its policy rate any time soon."
Tuesday's statement continues to show that the RBA has maintained its positive outlook on the economy, despite the expected drag from resources investment and public spending. However, given the continued decline in commodity prices, the RBA is starting to signal some discomfort that AUD may be diverging too much from fundamentals."
"The market’s reaction to the neutral statement from the RBA was mild, as AUD briefly jumped and the rates market experienced a small drop in yields. Both moves appear to have been more related to market positioning than any new information or views."
"The OIS curve remains very flat, although since the last meeting it has pushed near-term views on rate moves a little further out. In Figure 2, the OIS curve has small amounts of rate cuts priced into the curve until April 2015, with as much as 3.7bp priced to the lowest point on the rates curve. The first hike is not priced into the curve until Q3 2015."