SHORT AUDUSD: EYEING CPI PRINT - SELL 1.0%YOY, 0.3%Q; RBA EASING
AM 2:30GMT Ausssie Inflation prints are released these are key for determining their August Policy Decision
1. IMO a 1.0%yoy CPI print shows a further 0.3% contraction in their yearly CPI, this should be sufficient to push the RBA to cutting their OCR by 25bps, similarly a 0.3%qoq CPI will be needed in conjunction to show that inflation is growing at a slow pace.
2. RBA Minutes that support this view of low CPI leading to a cut from July said -
- On the margin RBA remained in line with previous meetings, adding little but still keeping it on the dovish side imo. Once again, as in previous minutes (and from several other central banks) RBA continued to communicate the necessity of "watching key data" to drive future policy decisions. Interestingly though, they also mentioned the negative impact of a strong AUD which in turn supports RBA doves out there as a cut is the remedy to stop a deflationairy currency in its tracks. Further, RBA notably were under no illusions regarding their inflation situation stating " inflation set to stay low for some time" - another encouraging stimulus for doves given inflation's important position/ weight for setting future policy.
- As per the attached post, i remain dovish/ bearsh on aussie$, and i continue to expect a cut to 1.50% (25bps) this year given i expect their inflation to remain stagnant. Clear targets are 0.73 when probability of a cut is higher - though i would enter shorts regardless if AUD$ could find its way to its 12m highs at 0.78, though unlikely.
- I like USD strength in the medium term too hence supporting the short Aussie dollar view
RBA Minutes Highlights:
RBA MINUTES: BOARD TO WATCH KEY DATA, WILL MAKE ADJUSTMENT TO RATES IF NEEDED; REVIEW OF FORECASTS IN AUG WILL HELP STEER POLICY
- Inflation set to stay low for some time, employment mixed, retail sales look set to pick up
- Stronger AUD would complicate economic rebalancing
- Economic transition is now well advanced
1. IMO a 1.0%yoy CPI print shows a further 0.3% contraction in their yearly CPI, this should be sufficient to push the RBA to cutting their OCR by 25bps, similarly a 0.3%qoq CPI will be needed in conjunction to show that inflation is growing at a slow pace.
2. RBA Minutes that support this view of low CPI leading to a cut from July said -
- On the margin RBA remained in line with previous meetings, adding little but still keeping it on the dovish side imo. Once again, as in previous minutes (and from several other central banks) RBA continued to communicate the necessity of "watching key data" to drive future policy decisions. Interestingly though, they also mentioned the negative impact of a strong AUD which in turn supports RBA doves out there as a cut is the remedy to stop a deflationairy currency in its tracks. Further, RBA notably were under no illusions regarding their inflation situation stating " inflation set to stay low for some time" - another encouraging stimulus for doves given inflation's important position/ weight for setting future policy.
- As per the attached post, i remain dovish/ bearsh on aussie$, and i continue to expect a cut to 1.50% (25bps) this year given i expect their inflation to remain stagnant. Clear targets are 0.73 when probability of a cut is higher - though i would enter shorts regardless if AUD$ could find its way to its 12m highs at 0.78, though unlikely.
- I like USD strength in the medium term too hence supporting the short Aussie dollar view
RBA Minutes Highlights:
RBA MINUTES: BOARD TO WATCH KEY DATA, WILL MAKE ADJUSTMENT TO RATES IF NEEDED; REVIEW OF FORECASTS IN AUG WILL HELP STEER POLICY
- Inflation set to stay low for some time, employment mixed, retail sales look set to pick up
- Stronger AUD would complicate economic rebalancing
- Economic transition is now well advanced
