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8 Jul 2013
Flash: Antipodean central banks primed for action – Westpac
FXstreet.com (New York) - The AUD slide in Q2 has encouraged markets to reduce pricing for further RBA cash rate cuts, notes Sean Callow, a Global FX Strategist at Westpac.
The next move is still firmly expected to be another cut, currently priced in full by the November meeting. Westpac looks for the next easing to come earlier, probably in August, after the Q2 CPI, with a further two 25bp cuts to a 2% cash rate by Q1 2014. The July RBA statement only reinforced our call for an August cut, currently only 45% priced – delivery of an August cut would open up 1.1500 on the AUD/NZD.
In addition, the RBNZ reviews the cash rate on 25 July, with a steady hand fully expected. However, “the RBNZ may sound a slightly more hawkish note as the housing boom continues and the NZD TWI falls (notwithstanding gains vs AUD). RBNZ monetary policy isn’t likely to be a hot topic in coming months, with the OCR likely to be held at 2.5% until Q1 2014.” Callow adds. Market expectations on this are not very fluid but obviously 2-year swap rates have jumped since May, mostly in sympathy with the rise in global rates.
The next move is still firmly expected to be another cut, currently priced in full by the November meeting. Westpac looks for the next easing to come earlier, probably in August, after the Q2 CPI, with a further two 25bp cuts to a 2% cash rate by Q1 2014. The July RBA statement only reinforced our call for an August cut, currently only 45% priced – delivery of an August cut would open up 1.1500 on the AUD/NZD.
In addition, the RBNZ reviews the cash rate on 25 July, with a steady hand fully expected. However, “the RBNZ may sound a slightly more hawkish note as the housing boom continues and the NZD TWI falls (notwithstanding gains vs AUD). RBNZ monetary policy isn’t likely to be a hot topic in coming months, with the OCR likely to be held at 2.5% until Q1 2014.” Callow adds. Market expectations on this are not very fluid but obviously 2-year swap rates have jumped since May, mostly in sympathy with the rise in global rates.