The Australian dollar is at the lows of the day, falling below 0.9350.
Earlier, the RBA released its Statement on Monetary Policy for May. There were some small, near-term signs but what stands out is the cut to the 2015 growth forecast to 2.75-3.00% from 3-4%.
They explicitly attributed the revision to the exchange rate rise. They also said that “with resource prices expected to decline further, historical relationships suggest that the exchange rate could move lower over time”.
Investment is also cool. The RBA noted that “firms continue to report through the Bank’s liaison program that they are waiting to see a sustained pick up in demand before committing to increasing capital expenditure”.
Overall it was a surprisingly downbeat report and suggests the RBA is a long ways from raising rates. The OIS market says it’s 50/50 whether the RBA hikes in the next year but unless China releases some stimulus, I don’t see it.
Technically, there is no great reason to sell but AUD/USD is vulnerable seasonally and souring risk appetite is a risk.
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