AUDUSD: RBA BANK HIGHLIGHTS - CUT & SELL OR STAND PAT & LONG?
Updated
Inline with the mixed information below, i too am undecided with what the RBA will do.
There are several arguments for a cut e.g. CPI falling at an alarming rate/ strong trend; strong aussie; 1.75% high yield and likely to maintain AUD strength. But several against e.g. some of the trimmed prints show stability at 1.7%; need for more data - aussie employment report etc, given the AUD only holds data reports quarterly.
That said, whilst im not certain on a RBA rate cut, i am certain on an RBNZ cut (more of a 25 or 50bps cut question), so going into RBA the lower conviction and risk trade is to play it through kiwi transmission e.g. short kiwi$ - an RBA cut will put downside pressure on kiwi$ too as it increases the chance of an RBNZ cut even more as the RBNZ will seek to drive their relative yield down and NZD currency appreciation down.
The release is expected at AM5:30GMT - I expect aussiedollar will lose 100-200pips from market on a 25bps cut and if they stand unchanged i expect a topside rally into the 767 resistance graveyard but terminally, with a no rate cut i think we will likely see an end of week close at the 0.782 12m high resistance level assuming the USD employment report is average.
Central bank confidence trades relatively low these days in the "disappointment era! however we have seen some strong conviction with bullish bets on RBA cut positioning so far with AUD$ down 100pips+ from yesterday - the lower we move pre-RBA the nastier a disappointment rally with be but also the short downside returns diminish - we could end up only seeing 100pip dropp if we move to 745 pre-decision.
BAML ON THE RBA:
- We expect the RBA to cut rates this week in response to a weak inflation pulse and spare capacity in the labour markeT.
- A cut should lend support to the rates curve above 40bp. We await better levels to reset AU US spread compression trades.
- The AUD is benefiting from the global search for positive yield and a rate cut is unlikely to deter this supportive inflow.
RBA to hold due to spot on CPI? - TDS
- Analysts at TD Securities explained that the recent AUD Q2 underlying CPI was spot-on the RBA’s expectations so they don’t think this will be a trigger for the Bank to cut.
RBA to cut tomorrow - MUFG
-Derek Halpenny, European Head of GMR at MUFG, suggests that the Australian dollar is one of those currencies that is currently much stronger than what is implied by the 2-year swap yield spread with the US.
RBA to cut 25bps at its August meeting – RBC CM
-Research Team at RBC Capital Markets, expects the RBA to cut 25bps at its August meeting.
RBA: Not enough grounds to cut rates in August - Commerzbank
- Antje Praefcke, analyst at Commerzbank notes that even though the market widely expects the RBA to cut the interest rate by 25 basis points from 1.75% to 1.50% next Asian session, they do not see enough grounds to lower the key interest rate in August.
RBS - RBA to be on hold
There are several arguments for a cut e.g. CPI falling at an alarming rate/ strong trend; strong aussie; 1.75% high yield and likely to maintain AUD strength. But several against e.g. some of the trimmed prints show stability at 1.7%; need for more data - aussie employment report etc, given the AUD only holds data reports quarterly.
That said, whilst im not certain on a RBA rate cut, i am certain on an RBNZ cut (more of a 25 or 50bps cut question), so going into RBA the lower conviction and risk trade is to play it through kiwi transmission e.g. short kiwi$ - an RBA cut will put downside pressure on kiwi$ too as it increases the chance of an RBNZ cut even more as the RBNZ will seek to drive their relative yield down and NZD currency appreciation down.
The release is expected at AM5:30GMT - I expect aussiedollar will lose 100-200pips from market on a 25bps cut and if they stand unchanged i expect a topside rally into the 767 resistance graveyard but terminally, with a no rate cut i think we will likely see an end of week close at the 0.782 12m high resistance level assuming the USD employment report is average.
Central bank confidence trades relatively low these days in the "disappointment era! however we have seen some strong conviction with bullish bets on RBA cut positioning so far with AUD$ down 100pips+ from yesterday - the lower we move pre-RBA the nastier a disappointment rally with be but also the short downside returns diminish - we could end up only seeing 100pip dropp if we move to 745 pre-decision.
BAML ON THE RBA:
- We expect the RBA to cut rates this week in response to a weak inflation pulse and spare capacity in the labour markeT.
- A cut should lend support to the rates curve above 40bp. We await better levels to reset AU US spread compression trades.
- The AUD is benefiting from the global search for positive yield and a rate cut is unlikely to deter this supportive inflow.
RBA to hold due to spot on CPI? - TDS
- Analysts at TD Securities explained that the recent AUD Q2 underlying CPI was spot-on the RBA’s expectations so they don’t think this will be a trigger for the Bank to cut.
RBA to cut tomorrow - MUFG
-Derek Halpenny, European Head of GMR at MUFG, suggests that the Australian dollar is one of those currencies that is currently much stronger than what is implied by the 2-year swap yield spread with the US.
RBA to cut 25bps at its August meeting – RBC CM
-Research Team at RBC Capital Markets, expects the RBA to cut 25bps at its August meeting.
RBA: Not enough grounds to cut rates in August - Commerzbank
- Antje Praefcke, analyst at Commerzbank notes that even though the market widely expects the RBA to cut the interest rate by 25 basis points from 1.75% to 1.50% next Asian session, they do not see enough grounds to lower the key interest rate in August.
RBS - RBA to be on hold
Note
UPDATE - BEARISH TRADE DATA COULD BE THE RBA'S FINAL PUSH?1. AUSTRALIA TRADE BALANCE (JUN): AUD -3195 MLN (EXP AUD -2000 MLN PREV AUD -2418 MLN)
- Australia Exports (MoM) Jun: -1.0% (prev 1.0%)
- Australia Imports (MoM) Jun: 2.0% (prev 2.0%)
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