RBA minutes suggest knee-jerk reaction
RBA pull flow under AUD with inflation downgrade
Outlook for AUD and USD
AUDUSD to set a new post-float record in 2016?
At 1.1%, the quarterly figure is now its highest in 2 quarters, the 2nd highest since March '13 and well above its 4-period average. The annualised figure sits proudly at 3.1%, its fastest rate of growth since 2012 and also above its 4-period average.
When you consider that the RBA significantly lowered their inflation forecasts without altering their GDP outlook, we felt that their GDP forecasts would either have to be revised lower, or their newly lowered inflation outlook to be revised upwards. With such a promosing GDP figure as witnessed today now on the table we suspect the latter scenario to unfold, with inflation to either beat their gloomy outlook or to be revised higher.
Either way, this will surely put some doubt into the minds of AUD bears who have been pricing in a rate cut these past few weeks.
At present the FED have reverted back to their hawkish outlook and have tested markets with a suggestion of a rate hike occurring relatively soon. If they are to pull the lever and raise rates, then this will see the yield differential between Australia and US narrow, allowing downwards pressure to persist. However, it also depends on if RBA remove their easing bias over the coming couple of months, as this may also take the sting out of any excessive bearish moves.
We stand with our call at the end of 2015; We expect the Australian Dollar to close in the red for 2016 to make it the first occasion AUD has closed lower over four consecutive years. However, the rate of decline will not likely be of the same magnitude as the preceding three years and for AUD to remain above 0.60. With higher growth for Australia and an expected upwards revision for inflation, along with a hawkish FED, we remain confident for this to be the case as the final 6 months of the year unfold.
Seasonally adjusted, GDP hit 3.1% YoY and 1.1% QoQ to help lift the Australian Dollar to an 11-session high and within striking reach of hitting 73c. AUDJPY broke to an intraday high of 21 sessions but has since retreated back to the open price.
Australian GDP the highest since 2012
The data set today helped 'ease' fears of further easing by RBA, and brings into question if they will be forced to revise their newly downgraded inflation forecasts higher again.