Market ahead of itself discounting RBA cuts?


FXstreet.com (Barcelona) - The chatter in the market is that after the upbeat Westpac consumer confidence, which showed a reading of 7.7% in February vs a 0.6% in January, sending the index to its highest since Dec 2010, the chances are that the RBA will prolong for longer its 'wait and see mode' as evidence mounts that the health of a core area of the economy like consumer sentiment, an indicator usually used to measure spending, is improving, even after the RBA left rates steady earlier this month.

Add to the equation the fact that the Australian benchmark S&P200 index just hit the 5,000, suggestive of growing confidence in the outlook of the economy one thinks, then we also have China growth picking up, stabilization in Europe, and the result seems to point that the RBA will be comfortable staying pat for longer. Cash rate futures put odds of a cut in March at 41%.

On the flip side, sure there still will be the more pessimist side of the market, betting for cuts in the near term and sticking to the latest statement of the RBA, where further cuts were not discarded, yet as things stand, the latter faces the threat of losing supporters. A break above 1.0350/60 resistance in the AUD/USD will be further indication that the market is shifting its view.

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