CBA on RBA's Lowe - "optimistic but certainly not hawkish"

Reserve Bank of Australia Governor Lowe spoke yesterday

He was in Perth for a lunchtime address (mid-afternoon Sydney time)

Mike had the posts up pronto:

• RBA's Lowe says higher global interest rates will flow through to Australia over time

and:

• RBA's Lowe : Rates more likely to go up than go down but not for some time

Overnight, Goldman Sachs weighed in, I have a summary here:

• Goldman Sachs: Its "clear the RBA is gradually shifting towards a more positive stance"

The morning note from one of the 'big four' Australian banks, CBA assesses the speech:

AUD underperformed across the board after RBA Governor Philip Lowe cooled down talk of rate rises during his speech yesterday afternoon. AUD/USD fell to a low near 0.7914 overnight.

There was some speculation ahead of the speech that Dr. Lowe may lay the ground work for future rate hikes.

• Instead, Dr Lowe delivered an optimistic but certainly not hawkish tone. He is positive about growth prospects, given encouraging job growth, elevated business conditions and improvements in the non-mining sector (and even WA).
• However, Lowe also stressed the current issues of weak wage growth and household income, subdued inflation and high household debt.
• The key point was the comment that -a rise in global interest rate rises has no automatic implications for Australia
• In Q&A, the Governor acknowledged that the next move in rates is likely to be up, not down, but also urged patience in saying rate won't be moved for some time.

CBA's forecast for the Australian dollar also:

Nonetheless, we still expect AUD/USD to trade closer to 0.8000 by year-end.

• Australia's higher terms of trade,
• the structural improvement in Australia's current account deficit,
• and positive real interest rates spread between Australian and the U.S. favour a higher AUD/USD
• Technically, the next important support for AUD/USD is offered at 0.7890.

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CBA did not mention iron ore in their morning note