RBA to Stay the Course, Avoid Stoking Aussie Gains: Analysis
(Bloomberg) -- The RBA may look through last week’s CPI headline print and leave policy on hold today while maintaining its implicit easing bias to avoid driving the Aussie higher, writes Bloomberg strategist Michael G. Wilson.
- Any departure from that bias in RBA’s statement, inferred or otherwise, could see AUD/USD test the 0.7734 October high
- Australia’s trade-weighted index, used by RBA as a gauge of competitiveness, has climbed even faster than the currency in recent weeks; TWI is near the highest since mid-2015
- The gain has come with an advance by commodities since the last RBA meeting Oct. 4; that bodes well for Australia’s economic prospects:
- Iron ore delivered to Qingdao has risen 15% to $64.38/MT
- Newcastle coal futures up 34% to $108.60/MT, a record for the November 2016 contract
- Net-long positioning on Aussie by leveraged funds was at 42,873 contracts as of Oct. 25, CFTC data shows; while elevated, that’s well below April’s high of 58,808 and may allow for further bullish bets
- RBA will leave its benchmark rate unchanged, according to 22 of 28 economists surveyed by Bloomberg; the remainder expect a 25bp cut; announcement due at 2:30pm Sydney time
- AUD/USD up 0.1% to 0.7609 into New York close
- NOTE: Michael G. Wilson is an FX strategist who writes for First Word. The observations he makes are his own.
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
To de-activate this alert, click
hereUUID: 7947283