1 Dec 2014
Commodity prices and rate cut expectations weighing down AUD – Nomura
FXStreet (Barcelona) - The Research team at Nomura anticipates AUD to depreciate further in coming weeks dragged down by the commodity prices fall and the reaction to rate cut expectations.
Key Quotes
“The Reserve Bank of Australia (RBA) will hold its next monetary policy meeting on 2 December. At its board meeting in November, the RBA left its policy rate unchanged at 2.50% and stated that “monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target” and that, “the most prudent course is likely to be a period of stability in interest rates”.”
“The Central Bank also reiterated that the currency remains too strong and, as a result, “is offering less assistance than would normally be expected in achieving balanced growth in the economy.””
“Rates expectations have shifted meaningfully since the November meeting. The market went from pricing in very little probability of a rate cut after the November meeting to pricing in about a 15bp cut by August next year. This change mainly happened after some weaker Chinese data. This is interesting since the domestic data have been resilient so far.”
“The AUD has continued its decline in November, depreciating by almost 2.5% since the November meeting, as commodity prices continue to fall and as a reaction to the move in rates. We believe AUD is likely to continue to depreciate in coming weeks.”
Key Quotes
“The Reserve Bank of Australia (RBA) will hold its next monetary policy meeting on 2 December. At its board meeting in November, the RBA left its policy rate unchanged at 2.50% and stated that “monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target” and that, “the most prudent course is likely to be a period of stability in interest rates”.”
“The Central Bank also reiterated that the currency remains too strong and, as a result, “is offering less assistance than would normally be expected in achieving balanced growth in the economy.””
“Rates expectations have shifted meaningfully since the November meeting. The market went from pricing in very little probability of a rate cut after the November meeting to pricing in about a 15bp cut by August next year. This change mainly happened after some weaker Chinese data. This is interesting since the domestic data have been resilient so far.”
“The AUD has continued its decline in November, depreciating by almost 2.5% since the November meeting, as commodity prices continue to fall and as a reaction to the move in rates. We believe AUD is likely to continue to depreciate in coming weeks.”