RBA meeting preview: Expect a more dovish outcome – Nomura

By FXStreet David Wagner, Global FX Strategist at Nomura, expects today’s RBA statement to read more dovish on balance, anticipating a 25bp raate cut in May, which should put downward pressure in the Aussie.

Key Quotes

“In Australia, the RBA is scheduled to meet on its cash rate target. We believe developments over the past few months will have shifted a reluctant RBA further toward easing, and expect its statement to read more dovish on balance (we forecast a 25bp rate cut in May, with the market currently pricing 20bp at that meeting).”

“While AUDUSD has strengthened in recent weeks because of an increase in iron ore prices, rate differentials turning more in favor of AUD, financial inflows and positioning, we believe the increase in iron ore prices could prove unsustainable and susceptible to correction.”

“On the Fed side, expectations of further policy normalization have fallen significantly, with the market going from pricing in about 55bp of hikes in 2016 to nothing a couple of weeks ago.”

“A repricing is likely if the economic data remain robust, which should prove to be supportive for USD. A repricing of expectations is in line with our views and would be negative for AUDUSD.”
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Source:: FX Street