The following are brief expectations for the RBA August policy statement as compiled from the related research reports of 10 major banks.
Overall, the RBA is universally expected to stay on hold with neutral statement, but there is some risk that the central bank could attempt to talk-down the AUD by using a stronger language on the currency at the commentary statement.
Strategy-wise, such a scenario could lead to some liquidation/profit-taking on newly established longs before buyers on dips start to emerge and that should eventually feed into the price action of any possible dips (shallow vs sustained).
Barclays Research: In light of recent clarifications by senior RBA officials on the policy stance, we expect the RBA to keep policy unchanged this week. We think the tone of the release is likely to be broadly similar to that in July, but the Bank might include discussions to signal that the RBA can be patient, given subdued wage and price inflation amid a gradual recovery in the labor market.
Morgan Stanley Research: We have turned tactically bullish on AUD. We retain a bearish view on AUD in the longer term, but the broader trend of reaching-for-yield should support higher carry currencies like AUD, with AUDUSD showing upside potential to 0.8370. Dovish commentary from RBA Governor Lowe, wherein he emphasized weak wage growth, and a below expectations CPI print, did little to alter the AUD upward trend, supporting our position that the global theme is outweighing domestic factors for now.
Credit Agricole CIB Research: We expect that t week’s policy meeting and the Statement on Monetary Policy will strengthen the message highlighting the disappointing headline and still subdued core inflation. The RBA may even refer to the importance of AUD for the rebalancing and the outlook of the economy, potentially highlighting that the recent strength has run in excess of the latest improvement in domestic and external FX fundamentals.
JP Morgan Research: The RBA made a concerted effort in July to distance itself from more hawkish peers.In its most recent communication, the RBA clearly abstained from more hawkish commentary and kept to a firm neutral bias. We view the lack of hawkish rhetoric from the RBA as confirming that policy in Australia is de-synchronized from most of its G10 peers. All else equal, this should be a significant headwind for the currency.
Citi Research: The RBA may keep the interest rate unchanged until 2018 2H amid property and consumption market risk and lower than expected global inflation. This may restrain AUD. Our 0-3 month forecasts are 0.77.
NAB Research: While the chances of the RBA cutting rates over the coming months are negligible, we think the Board has the arguments to increase its level of discomfort with currency in the Statement tomorrow, if they so choose to.
ANZ Research: Much of the good news that has propelled the AUD through the last month–looks well priced into the currency. With the USD back to its fair value levels, risk appetite looking stretched and given the current elevated level of the Australian surprise index, these sources are unlikely to provide further impetus to the AUD and, if anything, we see downside risks for the currency in the near term..Near-term downsides should be used to re-enter long positions. Patience will pay.
SocGen Research: It’s better to be too early than too late, but the RBA this week and the RBNZ next week will both make us wait and no-one much wants a stronger currency so the longs are going to struggle for good news, other than the ongoing sogginess of US bond yields, and the revival in commodity prices. Which is another way of saying we’ll be happy if we find AUD and CAD at these levels in a week’s time. The RBA meets tomorrow and the RBNZ meets next week. Neither will adjust rates, but maybe the RBA’s economic assessment will provide enough support to the market to prevent a correction.
Westpac Research: Of course, the Board will keep rates on hold as clearly signalled by important speeches from both the Governor and Deputy Governor over the last week. Therefore the interest directly associated with the Board meeting will be with the Governor’s associated Statement.
BofAML Research: Our latest estimate suggests the RBA’s own model would show the exchange rate at close to “fair value”. So if the RBA does not stand in the way of AUD appreciation, what will? In the near term, not much; domestic data surprises are positive but not extreme, the external backdrop has remained stronger for longer, and positioning is not stretched. We continue to expect a medium-term decline in AUDUSD in anticipation of an eventual slowdown in China demand.
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