The RBA was relatively neutral on the margin, keeping their inflation targets the same at 1.5-2.5. However, unfortunately for aussie shorts the RBA didnt offer any forward guidence on sentiment towards further easing, or specific reference to the aussie FX level - despite there being a strong bid bias brewing in the aud$ cross post-25bps cut. Also their forecasts for underlying inflation imo were quite positive at 1.5% vs 1.0% currently - this infers the RBA perhaps even thinks that the 1.5% rate will be sufficient to reach their inflation target, and that another cut this year isnt being thought about given they predict on target inflation with current policy. Although this does then run the downside risk of inflation staying low (as i expect) which may force the RBAs hand to cut again at years end if inflation is below 1.% or another print that misses the 1.5% expected mark.
At these levels aussie looks attractive on the offer with a 0.74xx target - however USD supply has been strife since last week when rate expectations sold off amid poor GDP print to just p12% in september - down from 25% earlier in the week.. this week failed to improve, with little impetus for this to be the case, though the greenback now looks to NFP today for guidance. A beat/ firm print should help aussie offer well at these levels given we are right at the double top 0.766 level, so any USD strength arising from the NFP print has a bias to see AUD$ move lower, though as the macro landscape questionably is changing, it is uncertain if it will be enough to surpress yield seekers demand for aussie deposits for long/ a sustained period (if at all), which is expecially odd since we saw the rate brought down this week whihc should have set a bearish tone for the week, as we have seen with the BOE and GBP. After NFP we will have a clearer view.
From here i think aussie positioning should be sidelined until the NFP print is clear - a miss and i actually think Aussie is better to trade bid, with 0.78 a firm target. A NFP hit and that should offer aussie lower, though for some reason I see the risk asymmetrically skewed to aussie topside, given the very week reaction to what is/ should be the biggest fundamental driver possible - a rate cut. So much of this trade is being vigilant - an NFP miss, buy a 0.766 confirmed breakout, a NFP hit - ensure AUD$ is trading with a clear bid bias.. any 10-30pips movement lower will not suffice at these levels, aussie is still likely bidding.
RBA Minutes Highlights:
- Underlying Inflation To Remain Under 2% For Much Of Forecast Period, Reach 2 % By End 2018 - Prospects For Economy Positive, But Low Inflation Allows For "Even Stronger Growth" - Judged Risks Associated With Rising House Prices And Debt Had Diminished - A$ Remains Significant Source Of Uncertainty For Inflation, Growth Forecasts - Economic Growth And Inflation Forecasts Little Changed Overall - Forecasts Underlying Inflation 1.5% By End 2016, 1.5-2.5% End 2017, 1.5-2.5% End 2018 - Forecasts GDP Growth 2.5-3.5% End 2016, 2.5-3.5% End 2017, 3-4% End 2018 - Says Unemployment To Fall Only A Little Out To 2018, Employment Growth To Be Modest This Year - Drag On GDP From Falling Mining Investment Looks To Have Peaked, Non-Mining Still Subdued - Dwelling Investment To Stay Strong For Next Year Or So, But Raises Risk Of Oversupply - GDP Growth Looks To Have Moderated In Q2 As Net Exports Added Less - Wage Growth Expected To Remain Low, Rise Modestly Out To 2018 - Increasing Supply, China Steel Cutbacks To Put Downward Pressure On Iron Ore Prices - Growth In China Expected To Slow Gradually Over Next Few Years, Housing A Risk - Brexit To Have Limited Effect On Australia's Major Trading Partners
Is there any way to forecast NFP??
I have done Distribution Return Anaysis on NFP percentage change associate with R GDP.
I wonder if we could forecast precise with initial, continous jobless claims + ISM NMI employment section within STD 1 value
QuantumLogicTrading
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The consensus NFP value is the median value from 30 analysts who have done the econometric calculations using a range of inputs... so basically theres no point in doing your own, the "consensus" reading is the best shot in general..
isaac312
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Thanks man. It was such a horrible number ...
QuantumLogicTrading
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why horrible? its given the usd some strength which is generally good?
isaac312
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Horrible in terms of accuracy ...
QuantumLogicTrading
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oh haha yh, they can only use the average/ median though.. if you can do a more accurate job let me know for sure ;) Theres so many moving parts its very hard to model with any degree of certainty imo
isaac312
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Seems to be they slightly manipulated???
Before Brexit, make it bad to look Dovish helpimg elsewhere EU banking liquidity. After Brexit event
Just become so horribly good two time to help FED Yellen. What a coincident
QuantumLogicTrading
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im not so sure about that, the USD has been struggling and GDP last week missed heavily so if they were manipulating they would have manipulated the GDP as well not just the NFP...
isaac312
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Good NFP but gdp sucks lol.
Strong USD helps JP.
Manipulating gdp is too too much tought lol
QuantumLogicTrading
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JP? haha im not sure about that.. the poor GDP print has had a worse effect than this good NFP... USD still has a bias to be offered it seems
Is there any way to forecast NFP??
I have done Distribution Return Anaysis on NFP percentage change associate with R GDP.
I wonder if we could forecast precise with initial, continous jobless claims + ISM NMI employment section within STD 1 value