Fitch: RBA Rate Cut Is Not Guaranteed…

(AU) RBA Gov Stevens: Recent economic data from China has shown some weakness, China data partly reflects European concerns; Requires close monitoring.


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Says: “There has been some data in China of a materially slower nature in recent times. It’s always hard to know if that’s persistent or of a temporary nature… Recent manufacturing data from China suggests a slower pace of growth rather than outright contraction… There’s no doubt the data in China in the past month or six weeks has been on the softer side and that’s partly a flow on from weaker demand out of Europe and partly a reflection of the fact they have engendered a slow down.. All we can do is watch that and try to assess it as time goes by.”

(US) Moody’s Byrne commented on China Debt trajectory was favorable if ‘all goes well’. The country’s debt to GDP ratio could test low teens in 2017. The IMF forecast assumed GDP growth of around 8%.

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 (AU) Fitch: More rate cuts from the RBA are not guaranteed; Australia economy is still growing strongly- Australia is vulnerable to Europe for trade.

How to interpret these?

We are seeing some optimism in the AUD as a result of speculation that RBA may not cut rates during the next meeting (June 5), as Governor Stevens said that China is suffering from a slower pace of growth rather than outright contraction, and that “all we can do is watch that and try to assess it as time goes by…” which signaled that RBA may pause from easing further, at least for the time being…  Also the comments from Moody’s predicting China’s GDP growth at 8% for this year and +13% by 2017, I believe the overall market is going to take it easy on AUD; and last but not least least, Fitch even went on saying that further RBA Rate Cut is not guaranteed as recent data out of Australia shows strong growth…

However, the important factor to consider is Europe as risk sentiments are the primary driver for the direction of risk currencies such as the AUD.  I’d still be selling AUDUSD on rallies, as I don’t see any concrete change in the market over the past few days.


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About Henry Liu

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  1. […] Retail Sales last week, following the much weaker than expected quarterly CPI release.  Although RBA Gov. Stevens recently stated that China’s economy has been slowing down due to slower pace of growth rather than outright […]

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