Back
7 Mar 2014
Flash: AUD/USD set to squeeze shorts towards 0.92/0.93 - RBS
FXStreet (Bali) - According to Greg Gibbs, FX Strategist at RBS, AUD is likely to squeeze out shorts and may rise to 0.92/93.
Key Quotes
As discussed in recent reports, the Australian economic data has been much stronger than expected over the last week. The RBA Governor has attempted to discourage the AUD from rising by saying it is historically high. He repeated that today to parliament. However, he has been reluctant to say more.
He has emphasised that the RBA currently expects a long period of stable rates. In fact he has suggested further cuts might be going too far as policy is easy and doing all that it can be reasonably expected to do, and that there is a virtue in stable rates that would help build confidence.
He said, "At the present time we judge monetary policy to be doing the things it can reasonably be expected to do in the circumstances we face. We have signalled the likelihood, if the economy evolves more or less as expected, of a period of stability in the cash rate. As well as the low level of interest rates generally, a sense of stability should be of some help for businesses and households as they form their plans."
Given we are in a yield seeking environment, the prospect of stable rates in Australia are likely to continue see excessive short positions squeezed.
We also see significant risks that the Australian employment report next week is stronger than expected. After the pick-up in business confidence in Q4, stability in job vacancy data for some months (and a sharp rise in February job ads- albeit too soon to flow into new jobs), the recent weakness in jobs growth looks excessive and thus a 'pay-back' rebound in jobs seems likely.
Our perception of recent reports suggests that the current negativity by the RBA and more so by many domestic economists over the mining down-turn and its broader influence on the economy is over-done. This risk is that rate hike expectations are brought forward in coming weeks to later this year and further supports the AUD. We see scope for a move back to .92/.93 in the current environment.
Key Quotes
As discussed in recent reports, the Australian economic data has been much stronger than expected over the last week. The RBA Governor has attempted to discourage the AUD from rising by saying it is historically high. He repeated that today to parliament. However, he has been reluctant to say more.
He has emphasised that the RBA currently expects a long period of stable rates. In fact he has suggested further cuts might be going too far as policy is easy and doing all that it can be reasonably expected to do, and that there is a virtue in stable rates that would help build confidence.
He said, "At the present time we judge monetary policy to be doing the things it can reasonably be expected to do in the circumstances we face. We have signalled the likelihood, if the economy evolves more or less as expected, of a period of stability in the cash rate. As well as the low level of interest rates generally, a sense of stability should be of some help for businesses and households as they form their plans."
Given we are in a yield seeking environment, the prospect of stable rates in Australia are likely to continue see excessive short positions squeezed.
We also see significant risks that the Australian employment report next week is stronger than expected. After the pick-up in business confidence in Q4, stability in job vacancy data for some months (and a sharp rise in February job ads- albeit too soon to flow into new jobs), the recent weakness in jobs growth looks excessive and thus a 'pay-back' rebound in jobs seems likely.
Our perception of recent reports suggests that the current negativity by the RBA and more so by many domestic economists over the mining down-turn and its broader influence on the economy is over-done. This risk is that rate hike expectations are brought forward in coming weeks to later this year and further supports the AUD. We see scope for a move back to .92/.93 in the current environment.