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21 Apr 2015
RBA expected to cut rates in May – Danske Bank
FXStreet (Edinburgh) - Kristoffer Lomholt, Analyst at Danske Bank, sees the RBA cutting the repo rate by 25 bp at the May meeting.
Key Quotes
“Since the February decision to cut the monetary policy rate, iron ore prices have fallen by more than 25%, unemployment remained close to a 12.5-year high and the ‘animal spirits’ from business investments that RBA governor Glenn Stevens has continually referred to as important are still unseen”.
“Therefore, it seems that the bank’s decision to stay sidelined at the last meetings merely reflects a preference to await the full effects of the February cut”.
“We expect RBA to cut at the next meeting on 5 May (where new forecasts are also published) by 25bp in order to ease the rigid transition from a commodity-based economy to a more diversified model”.
“Consequently, we expect more AUD/USD to play out in the coming month and target AUD/USD at Stevens ‘unofficial target’ of 0.75 in 1M”.
“In addition, we expect a Fed repricing to drive continued USD strength, which should contribute to sending AUD/USD lower towards 0.74 in 3M”.
“We expect the cross to stabilise in 6-12M, when a Fed hiking cycle has been priced and the ‘Aussie’ economy recovers”.
Key Quotes
“Since the February decision to cut the monetary policy rate, iron ore prices have fallen by more than 25%, unemployment remained close to a 12.5-year high and the ‘animal spirits’ from business investments that RBA governor Glenn Stevens has continually referred to as important are still unseen”.
“Therefore, it seems that the bank’s decision to stay sidelined at the last meetings merely reflects a preference to await the full effects of the February cut”.
“We expect RBA to cut at the next meeting on 5 May (where new forecasts are also published) by 25bp in order to ease the rigid transition from a commodity-based economy to a more diversified model”.
“Consequently, we expect more AUD/USD to play out in the coming month and target AUD/USD at Stevens ‘unofficial target’ of 0.75 in 1M”.
“In addition, we expect a Fed repricing to drive continued USD strength, which should contribute to sending AUD/USD lower towards 0.74 in 3M”.
“We expect the cross to stabilise in 6-12M, when a Fed hiking cycle has been priced and the ‘Aussie’ economy recovers”.