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20 May 2015
RBA siding with the AUD bears – BAML
FXStreet (Barcelona) - Strategists at BofA-Merrill Lynch, believe that the RBA has scope to strengthen its easing bias if needed and remains on the side of AUD bears.
Key Quotes
“In our view, keeping the easing bias in the statement, even after the rate cut, could have been a relatively costless option and prevented the recent back up in AUD/USD above 0.80. The clarification since then has slightly reversed the move and led the market to factor in some easing risk over the coming year (although still not a full cut).”
“We believe the RBA has scope to strengthen its easing bias if needed, especially if the AUD strengthens materially.”
“We do not agree with the view that RBA rate cuts so far have not weakened the AUD for the simple reason that we do not know the counterfactual – the AUD would likely be at a much stronger level in the absence of rate cuts.”
“For now, we believe the RBA is on the side of AUD bears and would like to see the exchange rate below “fair value”
Key Quotes
“In our view, keeping the easing bias in the statement, even after the rate cut, could have been a relatively costless option and prevented the recent back up in AUD/USD above 0.80. The clarification since then has slightly reversed the move and led the market to factor in some easing risk over the coming year (although still not a full cut).”
“We believe the RBA has scope to strengthen its easing bias if needed, especially if the AUD strengthens materially.”
“We do not agree with the view that RBA rate cuts so far have not weakened the AUD for the simple reason that we do not know the counterfactual – the AUD would likely be at a much stronger level in the absence of rate cuts.”
“For now, we believe the RBA is on the side of AUD bears and would like to see the exchange rate below “fair value”