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1 Apr 2014
China data, RBA eyed - Westpac
FXStreet (Bali) - As Sean Callow, FX Strategist at Westpac notes, the calendar in Asia is very crowded, with the main focus being the Chinese PMIs and the RBA monetary policy meeting.
Key Quotes
"There are various PMIs due around the region but the market focus will be on China’s official PMI for March (12pm Syd/9am local). This is a much larger survey than the Markit/HSBC version. Expectations are for little change in the headline, around 50.1 from 50.2 in Feb. There would be at least a knee-jerk selloff in AUD etc if the index dips below 50 for the first time Sep 2012, which is well within the range of monthly volatility. But having brushed off the very weak HSBC ‘flash’ PMI last week, AUD should find new buyers, especially ahead of the RBA statement. The final reading on the HSBC version is due 9:45am China, with any revision from the 48.1 ‘flash’ reading likely to be minor."
"The RBA Board meeting should be a short one today, with policy firmly on hold at 2.5% (2:30pm Syd/11:30am Sing/HK). The statement should conclude with March’s declaration that “the most prudent course is likely to be a period of stability in interest rates.” Since the last meeting, we have seen a decent GDP reading, strong employment (finally) but no update on CPI or business investment intentions. Commentary from the RBA last week firmly indicated no change in policy near term, with signs that low interest rates are having an effect but only gradually and very soft wages growth likely to ensure inflation cools in H2 14. March’s observation that “the exchange rate remains high by historical standards” may well be retained. Westpac looks for no change until H2 2015 when the cash rate should rise. Ahead of the meeting, markets are pricing flat rates to Sep, +7bp by Dec, +15bp by March 2015."
Key Quotes
"There are various PMIs due around the region but the market focus will be on China’s official PMI for March (12pm Syd/9am local). This is a much larger survey than the Markit/HSBC version. Expectations are for little change in the headline, around 50.1 from 50.2 in Feb. There would be at least a knee-jerk selloff in AUD etc if the index dips below 50 for the first time Sep 2012, which is well within the range of monthly volatility. But having brushed off the very weak HSBC ‘flash’ PMI last week, AUD should find new buyers, especially ahead of the RBA statement. The final reading on the HSBC version is due 9:45am China, with any revision from the 48.1 ‘flash’ reading likely to be minor."
"The RBA Board meeting should be a short one today, with policy firmly on hold at 2.5% (2:30pm Syd/11:30am Sing/HK). The statement should conclude with March’s declaration that “the most prudent course is likely to be a period of stability in interest rates.” Since the last meeting, we have seen a decent GDP reading, strong employment (finally) but no update on CPI or business investment intentions. Commentary from the RBA last week firmly indicated no change in policy near term, with signs that low interest rates are having an effect but only gradually and very soft wages growth likely to ensure inflation cools in H2 14. March’s observation that “the exchange rate remains high by historical standards” may well be retained. Westpac looks for no change until H2 2015 when the cash rate should rise. Ahead of the meeting, markets are pricing flat rates to Sep, +7bp by Dec, +15bp by March 2015."