TD response to the Reserve Bank of Australia minutes that were released yesterday
(ps. on the minutes, ICYMI: minutes from the June meeting.
)
TD:
RBA minutes noted it would be premature to bring QE to an end.
Policymakers sketched out three scenarios on how they could proceed from here.
- First, they could continue QE at A$100bn over 6 months.
- Next, they could scale purchases or spread them over a longer period of time.
- Finally, they could review the pace of bond purchases more frequently based on data and the outlook.
Our call is for the RBA to deliver another A$50bn in QE over 6 months.
- At the same time, however, we think RBA may also seek more flexibility. As for YCC, the Bank reiterated it is unlikely to meet conditions to hike the cash rate until 2024 at the earliest. This message remains unchanged, so we expect the Apr'24 bond to remain as the YCC target bond.
The real focus for this week in AUD will be Thursday's speech from Governor Lowe, entitled 'From Recovery to Expansion'.
So far at least, AUD/USD continues to respect its recent range boundaries with the 0.7675/85 zone providing support once again. At the same time, we have seen what looks like a little profit-taking in AUD/NZD after a decent run to the upside this month couldn't hold on to a 1.08 handle. We wouldn't be too surprised to see a bit more pullback there, with the first real support coming in around 1.0760 ahead of the 1.0725 pivot.
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