HSBC on the RBA & Australian dollar (fundamental & technical comments)
This is a bit of a quickie
Firstly, via HSBC's Paul Bloxham on the Reserve Bank of Australia and AUd:
- Canada has started; the US has been on the path for some time; the ECB's tone has shifted and so has that of Norway and Sweden. Australia? Soon, but not yet.
- In our view, the key two factors that forced the RBA to cut to a very low, 1.50%, cash rate setting are now both receding. First, was the massive resources cycle, with very low rates needed to rebalance growth to the non-mining sectors as mining investment and commodity prices fell. Second, extraordinarily low global interest rates meant that a low cash rate was needed to keep the AUD down, again, to rebalance growth.
- Now, with the mining downturn around its trough and global rates rising, Australia may not need a record low cash rate for much longer. But, unlike with the other central banks, don't expect forward guidance from the RBA. You've got to watch the data. We expect a hike in C11 2018.
And, elsewhere from HSBC a real quickie on some of the straightforward tech levels (this from a Friday note - July 14)
- The AUD is making fresh year-to-date highs post-Yellen.
- The March 0.7750 high has been breached ... and now sets up a test of .... the 2016 high of 0.7835
- All this despite yesterday's dip in consumer confidence suggests global drivers are the bigger factor as higher yielding risk assets continue to be supported.