RBA: Rate cut in June and August? - Westpac

Sandeep Kanihama FXStreet Contributor

Robert Rennie, analyst at Westpac, suggests that Westpac is now forecasting a rate cut from RBA in June and August, versus August and November.

Key Quotes

“Given the clear guidance in the RBA minutes from the May meeting released today that "in the scenario where there was no further improvement in the labour market in the period ahead ... a decrease in the cash rate would likely be appropriate" and then in today's Lowe speech that "at our meeting in two weeks' time, we will consider the case for lower interest rates", its arguably the case that the FX market would be surprised if the RBA does not deliver a rate cut on June 4.”

“Our fair value framework continues to be helpful in trying to understand what this means for the A$, especially given the backdrop of sharply rising iron ore prices and recovering iron ore export volumes. Even with the highest level for iron ore back to May 2014, the midpoint of our fair value model has dropped by 2.75% in the last 5 weeks (0.7220 down to 0.7018) as markets have moved from circa 25% priced to circa 90% priced for a cut in June.”

“Given the backdrop of the recent moves by Trump to 'clear the decks' on trade/ tension with Europe and Japan but at the same time 'double down' on pressure on China, we remain of the view that the A$ should continue to be capped by the midpoint of our fair value model. This strategy has served us well so far this year - with the A$ not closing above the mid-point since early December. This then argues that the A$ should remain capped on strength towards 0.70 and we remain focussed on further weakness down to our long held 0.68 target.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10

Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.

Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.