Nomura's research team in response to the RBA decision earlier
The RBA left its cash rate unchanged for an unprecedented 18th straight meeting earlier today here. It was pretty much a non-event, and Nomura even highlighted how five of the ten paragraphs in the statement were a word-for-word repeat of March's statement.
Anyway, this was what they had to say in response:
- New additions did have a net softer tilt, including its acknowledgement of US trade policy uncertainty
- RBA also noted recent tightening in short-term funding markets and recent price declines of some key commodities
- Base case remains for a first rate hike in November 2018
- In terms of market strategy, we continue to think that the very front of the OIS strip has rallied too far
- Remains cautious on AUD, noting lower bulk commodity prices and a speculative community that is still somewhat long AUD
- Expects AUD to ease further, to around AUD/USD 73-75 cents over Q2/Q3
Their view that the RBA will raise rates before the end of the year is not what most participants in the market are viewing. The decision by the RBA today leaves little to the imagination to be honest. The language remains the same, and as long as economic conditions remain soft the way they are now - there are also no signs that it will turn around yet - then the RBA may just have to stay on hold indefinitely.
