An interesting item from NW on the forex, this after analysts spoke with clients and officials in Sydney and Melbourne
This in brief from a detailed note:
- Reserve Bank of Australia remains more optimistic regarding the property sector's risks
- constructive outlook on the broader economy
- housing market risks do not appear unmanageable to the RBA
- household debt is already high. But the RBA observes that bank lending to people wanting to buy homes to live in is robust - in contrast to mortgage lending to investors
- mortgage rates remain low
- RBA remains mindful of the risks to consumption given high household debt. But employment growth continues to be strong
- the weakness of the Australian dollar against the US dollar is helping re-balance the economy. It also implies the exchange rate will not be a hurdle when the central bank decides to start raising interest rates.
- the key to the RBA's first rate hike remains the tightening labour market
- if the labour market keeps strengthening the risk is that the RBA will shift to a tightening bias
On the AUD and NZD:
- In the near term the Australian dollar continues to be under pressure against the US dollar
- we think the NZ dollar remains a better short given the Reserve Bank of New Zealand's clear dovish outlook
