Analysis from Nomura on the rbaa Reserve Bank of Australia and ozAustralian dollar after Friday's RBA Statement on monetary policy.

This in (very) brief:

On the RBA:

  • Statement on Monetary Policy (SOMP)… increases our confidence that rate cuts are coming
  • Several of its comments were a little more dovish, in our view, and its forecast revisions, while close to our expectations, actually tilted a little softer than we thought they might in a few places
  • We continue to forecast 25bp rate cuts in August and November
  • we are confident that rate cuts are coming, they are perhaps not quite yet imminent.

AUD:

  • our conviction has grown that the most likely path is still lower
  • We have a below-consensus local growth and inflation view, we believe short-end rate differentials against the US will widen further (and with no forecast rate cut from the Fed, in contrast to current pricing) and we see global risks (our caution on China, elevated US/China trade tensions) and local risks (housing market, political uncertainty) as pointing to the downside.
  • Technically, a clear negative trend is in place and short AUD/USD offers positive carry.