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25 Sep 2015
RBA and RBNZ: Rate cuts still on the table - Rabobank
FXStreet (Córdoba) - Jane Foley Senior FX Strategist at Rabobank considers that the central banks of Australia and New Zealand could cut rates again, despite the decline in AUD and NZD.
Key quotes:
“The RBNZ has been very candid in its policy guidance. When cutting rates on September 10 the RBNZ stressed that “at this stage, some further easing in the OCR seems likely”. This suggests that there is scope for another policy move before the end of the year. We expect NZD/USD to move to 0.61 on a 6 mth view.”
“Comments from RBA Governor Stevens last week that he is ‘pretty content’ with policy settings suggests there may be no imminent danger of another reduction in interest rates. However, the longer China prints weak economic data, the greater are the risks to the Australian economy.”
“We still see risk that the RBA will cut rates again this cycle to provide insulation to the economic outlook – a view which is supported by signs that the housing market activity may at last be peaking. One factor that could slow the RBA’s trigger finger would be a continued fall in the value of Australia’s effective exchange rate, though this would be less likely if the BoJ and ECB embark on further easing measures. Either way we continue to see downside risks for AUD/USD towards 0.68 on a 6 mth view.”
Key quotes:
“The RBNZ has been very candid in its policy guidance. When cutting rates on September 10 the RBNZ stressed that “at this stage, some further easing in the OCR seems likely”. This suggests that there is scope for another policy move before the end of the year. We expect NZD/USD to move to 0.61 on a 6 mth view.”
“Comments from RBA Governor Stevens last week that he is ‘pretty content’ with policy settings suggests there may be no imminent danger of another reduction in interest rates. However, the longer China prints weak economic data, the greater are the risks to the Australian economy.”
“We still see risk that the RBA will cut rates again this cycle to provide insulation to the economic outlook – a view which is supported by signs that the housing market activity may at last be peaking. One factor that could slow the RBA’s trigger finger would be a continued fall in the value of Australia’s effective exchange rate, though this would be less likely if the BoJ and ECB embark on further easing measures. Either way we continue to see downside risks for AUD/USD towards 0.68 on a 6 mth view.”