Friday 8th May 2015 – 11:40
Choppy price action in AUD overnight off the back of the RBA’s mixed Statement on Monetary Policy. AUD has held well considering the Chinese data and comments from the RBA. The RBA reiterated its guidance in May policy meeting that the rate cut was appropriate to provide some additional support to the economy and left out its previous easing bias, despite lowering its GDP and inflation forecasts…2015-16 GDP was cut by half a percentage point from February’s assessment to a range of 2% to 3%. GDP projection in subsequent years were lowered by 25bps. GDP growth is forecast to remain below trend for a bit longer than had been anticipated in February and non-mining business investment is forecast to pick up later than earlier envisaged. Headline and underlying inflation forecasts from 2016 were also reduced by 25bps. The RBI cites risks to forecasts from the slowdown in China and the uncertainty from households respond to the contrasting effect of low growth in income and rising wealth from the housing market.
AUD had a squeeze up to 0.7929 immediately before coming off to a low of 0.7863. Behind the whipsaw price action was a debate about whether the official easing bias remains in. Goldman Sachs research points to the phrase, “the Board will continue to assess the outlook and adjust policy as needed” as the proof that the easing bias remains and along with a downgrade in growth forecasts. However, the market is not necessarily convinced as demonstrated by the fact we are now trading higher than before the statement.
Looking forward to NFPs today, another weak payrolls number would be very highly supportive of both the AUD & NZD both against the dollar.
Levels: AUD: support at 0.7863 with 0.7787 below, resistance at 0.8031. NZD: support at 0.7392 with resistance at the 100-dma at 0.7555.