Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


IG's Forex Thoughts

IG's Forex Thoughts

Predictably, AUD/USD and the AUD crosses traded in a tight range throughout Asia, with AUD/USD moving between 1.0414 and 1.0434 up until the RBA statement. Prior to the RBA cutting rates to 3%, we were keen to see the level of Australian government bond holdings for the September quarter given that foreign central bank buying has been a key source of AUD strength for much of 2012. It seems that foreign central banks now hold 72.2% of all outstanding debt in the September quarter, down from 76.6% in the three months prior, with foreign holdings of bonds with maturities of one-year or more falling by 3.6 percentage points to 74.4%. So it seems that non-residents have increased their long-term debt holdings on the prior year, but it is clear that the pace of buying is falling and this could take away much of the impetus to drive AUD/USD above the September high of 1.0625 anytime soon.

The reaction in the currency space was relatively predictable in some ways given you had a market that was clearly positioned for a cut, with retail traders having a large short bias while the swaps markets was pricing in a 93% probability of easing. From a pure risk reward perceptive it favoured being long, with the real downside risk being a significantly dovish statement. AUD/USD rallied to 1.0458 after the market had viewed the statement and realised that the RBA had kept the door open to more cuts, although it didn’t sound too concerned about current financial markets. There were no major changes in language and the statement gave no real indications that the bank was going to cut 68 basis points (bps) over the next twelve months. We would not be surprised if AUD/USD and some of the crosses creep higher in the short-term as some who had been positioned for a series of cuts in 2013 close out, however the initial trade looks like some are selling the rally. The bank did make reference to the recent CAPEX numbers, suggesting the ‘peak in resource investment is approaching’, although some would argue that the most important number for the RBA next year will be the Q4 CAPEX numbers on February 28, which will give the bank a clear, twelve-month view of business spending intentions through to June 2014. We feel the last paragraph of the statement is important, which suggests ‘the full effects of earlier measures are yet to be observed, the Board judged at today's meeting that a further easing in the stance of monetary policy was appropriate now’. That for us seems a strong take-out.

The RBA now has eight weeks to assess how the 175bps of easing have worked through the system and the current landscape ahead of its February meeting. Things could be very different by then given the ‘fiscal cliff’ and the potential this event has to disrupt sentiment in a market that is positioned for a positive outcome. However, in the short-term, we would suggest waiting for price to dictate play and would potentially advocate long positions on a daily close in AUD/USD above the November 7 high of 1.0480. On the other hand a close below 1.0390 would suggest a deeper pullback to 1.0288, the November low.

ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Power Outages, Roads Close: Easter Storm Moving Down Country

The NZ Transport Agency says storm conditions at the start of the Easter break are making driving hazardous in Auckland and Northland and it advises people extreme care is needed on the regions’ state highways and roads... More>>

ALSO:

Houses (& Tobacco) Lead Inflation: CPI Up 0.3% In March Quarter

The consumers price index (CPI) rose 0.3 percent in the March 2014 quarter, Statistics New Zealand said today. Higher tobacco and housing prices were partly countered by seasonally cheaper international air fares, vegetables, and package holidays. More>>

ALSO:

Notoriously Reliable Predictions: Budget To Show Rise In Full-Time Income To 2018: English

This year’s Budget will forecast wage increases through to 2018 amounting to a $10,500 a year increase in average full time earnings over six years to $62,200 a year, says Finance Minister Bill English in a speech urging voters not to “put all of this at risk” by changing the government. More>>

ALSO:

Prices Up, Volume Down: March NZ House Sales Drop 10% As Loan Curbs Bite

New Zealand house sales dropped 10 percent in March from a year earlier as the Reserve Bank’s restrictions on low-equity mortgages continue to weigh on sales of cheaper property. More>>

ALSO:

Scoop Business: Chorus To Appeal Copper Pricing Judgment

Chorus will appeal a High Court ruling upholding the Commerce Commission’s determination setting the regulated prices on the telecommunications network operator’s copper lines. More>>

ALSO:

Earlier:

Cars: Precautionary Recalls Announced For Toyota Vehicles

Toyota advises that a number of its New Zealand vehicles are affected by a series of precautionary global recalls. Toyota New Zealand General Manager Customer Services Spencer Morris stressed that the recalls are precautionary. More>>

ALSO:

'Gardening Club': Air Freight Cartel Nets Almost $12 Million In Penalties

The High Court in Auckland has today ordered Swiss company Kuehne + Nagel International AG to pay a penalty of $3.1 million plus costs for breaches of the Commerce Act. Kuehne + Nagel’s penalty brings the total penalties ordered in this case to $11.95 million ... More>>

ALSO:

Crown Accounts: Revenue Below Projections

Core Crown tax revenue has increased by $1.9 billion (or 5.0%) compared to the same time last year. However this was $1.1 billion less than expected and is reflected across most tax types, continuing the pattern of recent months. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news