Trading the RBA – TD Securities

The FX Strategists at TD Securities offer their expectations on the upcoming Reserve Bank of Australia’s (RBA) monetary policy decision and the Statement on Monitory Policy (SoMP) due later this week.

Key Quotes:

“TD and consensus expect the RBA to keep the cash rate on hold at 0.75% at tomorrow’s Board meeting. OIS is placing ~25% chance of a cut to 0.5%. We expect the Bank to retain an easing bias and cut next in Apr.

Q3 Private consumption growth was weak, RBA Nov'19 SoMP consumption f/c's appear too high and bus investment f/c's appear ambitious. Expect the RBA to downgrade Dec'20 GDP to 2.5-2.6%/y. Does the Bank retain its Dec'21 GDP 3.1%/y f/c?

The Statement is unlikely to shed light completely on these f/c's. Accordingly, the Gov's speech on Wed titled 'The Year Ahead' is likely to take on greater significance ahead of the Fri 7th Feb SoMP release.

RBA Feb cut odds overdone on virus. Add to paid Feb'20 OIS at 0.69%, DV01 A$50k. US$0.6670 HUGE level.”