23 Jul 2013
Flash: Australia to capture spotlight Wednesday – UBS
FXstreet.com (New York) - Australia's quarterly inflation report is due on Wednesday, promising to inject some life into these subdued holiday FX markets, notes Research Analyst Gareth Berry at UBS.
Key quotes
“Our economists think inflationary pressure will be weak enough to trigger a 25bp RBA cut on August 6. Only 17bp of easing is currently priced in, so we expect significant Australian dollar sensitivity to any surprise in either direction.”
“Another cut would bring policy rates in New Zealand and Australia into line at 2.5% each. We recommended selling AUDNZD as a trade on Feb 1, partly in anticipation of this.”
However, “we believe selling the AUD/NZD now still makes sense. The Australian economy needs to rebalance away from its dependence on mining investment as a source of growth. This is not optional - if dormant sectors of the economy are not revived in time to pick up the slack, then economic growth is likely to falter.”
Key quotes
“Our economists think inflationary pressure will be weak enough to trigger a 25bp RBA cut on August 6. Only 17bp of easing is currently priced in, so we expect significant Australian dollar sensitivity to any surprise in either direction.”
“Another cut would bring policy rates in New Zealand and Australia into line at 2.5% each. We recommended selling AUDNZD as a trade on Feb 1, partly in anticipation of this.”
However, “we believe selling the AUD/NZD now still makes sense. The Australian economy needs to rebalance away from its dependence on mining investment as a source of growth. This is not optional - if dormant sectors of the economy are not revived in time to pick up the slack, then economic growth is likely to falter.”