2 Jul 2013
Flash: If RBA retains familiar line, AUD/USD bounce limited - Westpac
FXstreet.com (Barcelona) - The market is only pricing a 20% chance of the RBA cutting the cash rate 25bp to 2.50% at today’s policy window, comments Sean Callow, FX Strategist at Westpac.
The current pricing, in view of Callow, "is probably more than enough given AUD TWI has fallen a further -4% since the June meeting, domestic activity data has been no worse than mixed and the next inflation reading is still 3 weeks away." However, as Callow adds, "pricing for another cut should not be zero, given the sluggish growth outlook as mining investment peaks and (currently) nonthreatening inflation."
Callow expects the statement to retain a variation on the familiar line that there is “some scope for further easing”. If this happens to be the case, "AUD/USD should see only a small bounce, perhaps 30-40 pips" Callow said. Westpac looks for the next cut to be in August, "after the Q2 CPI (24 Jul) provides a fresh 'all clear'" Callow concluded.
The current pricing, in view of Callow, "is probably more than enough given AUD TWI has fallen a further -4% since the June meeting, domestic activity data has been no worse than mixed and the next inflation reading is still 3 weeks away." However, as Callow adds, "pricing for another cut should not be zero, given the sluggish growth outlook as mining investment peaks and (currently) nonthreatening inflation."
Callow expects the statement to retain a variation on the familiar line that there is “some scope for further easing”. If this happens to be the case, "AUD/USD should see only a small bounce, perhaps 30-40 pips" Callow said. Westpac looks for the next cut to be in August, "after the Q2 CPI (24 Jul) provides a fresh 'all clear'" Callow concluded.