25 Sep 2013
Flash: RBA potential frustrations over AUD rebound - BAML
FXstreet.com (London) - Strategists, Saul Eslake, Bin Gao and Adarsh Sinha at The Bank of America Merrill Lynch noted the rebound in the AUD.
“The RBA will be frustrated at the latest rebound in the Australian dollar, but that won't be enough to prompt a further rate cut at next week's Board meeting”.
“Rather, the RBA is likely to want to judge the extent to which the improvement in business confidence prompted by the change of government at the 7 September election is sustained”.
“Given we see low chance of near-term RBA cut, paying AUD 1y swap with nil carry/roll is a good hedge to our recommended receive AUD 2y2y position. In FX, the downside AUDUSD skew looks extreme following the reduction in tail-risk post FOMC and we recommend fading it”.
“ RBA unlikely to cut rates next week”.
“We see very little likelihood that the Reserve Bank Board will change the cash rate at next week's monthly Board meeting. At the meeting held on 3 September, Board members decided to "neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them", and to "continue to examine the data over the months ahead to assess whether monetary policy was appropriately configured"”.
“The RBA will be frustrated at the latest rebound in the Australian dollar, but that won't be enough to prompt a further rate cut at next week's Board meeting”.
“Rather, the RBA is likely to want to judge the extent to which the improvement in business confidence prompted by the change of government at the 7 September election is sustained”.
“Given we see low chance of near-term RBA cut, paying AUD 1y swap with nil carry/roll is a good hedge to our recommended receive AUD 2y2y position. In FX, the downside AUDUSD skew looks extreme following the reduction in tail-risk post FOMC and we recommend fading it”.
“ RBA unlikely to cut rates next week”.
“We see very little likelihood that the Reserve Bank Board will change the cash rate at next week's monthly Board meeting. At the meeting held on 3 September, Board members decided to "neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them", and to "continue to examine the data over the months ahead to assess whether monetary policy was appropriately configured"”.