20 Nov 2015
Central Bank fence-sitting - ANZ
FXStreet (Bali) - The ANZ Research Team shares their latest thoughts on the market, noting that the market remains fairly confident of a Fed rate hike in December, while they still call for a 50bp RBA rate cut in 2016.
Key Quotes
"There wasn’t a lot in yesterday’s FOMC Minutes to sway expectations on the prospects of a December rate hike. Markets have the odds at around 68% – broadly where they have been for the past couple of weeks."
"Markets are even more confident of where rates are heading in Australia after a surprisingly strong labour force report last week saw markets lower the chance of a rate cut in December (now sitting at 10%) and push out the timing of the first rate cut."
"We are still calling 50bps of cash rate cuts in H1 2016 (the first being in February), but are mindful that the RBA will have two more labour force reports, Q4 CPI data, and the Fed to digest before their first meeting in 2016."
"In comparison, markets appear to be fence-sitting on what the likely outcome may be for rates in New Zealand. Markets are currently putting 50/50 odds on a cut, which is in fact up from around 40/60 earlier this week."
"We still have one further 25bp cut within our own baseline forecasts (but not until next March). However, we still feel that the most likely outcome is that the RBNZ will ‘watch and wait’ a little longer."
"While recent dairy developments do leave us mindful and the NZD remains relatively high, business and consumer confidence is rebounding, evidence is growing that the economy is regaining momentum, and sectors such as tourism, construction, and broader services continue to perform well."
Key Quotes
"There wasn’t a lot in yesterday’s FOMC Minutes to sway expectations on the prospects of a December rate hike. Markets have the odds at around 68% – broadly where they have been for the past couple of weeks."
"Markets are even more confident of where rates are heading in Australia after a surprisingly strong labour force report last week saw markets lower the chance of a rate cut in December (now sitting at 10%) and push out the timing of the first rate cut."
"We are still calling 50bps of cash rate cuts in H1 2016 (the first being in February), but are mindful that the RBA will have two more labour force reports, Q4 CPI data, and the Fed to digest before their first meeting in 2016."
"In comparison, markets appear to be fence-sitting on what the likely outcome may be for rates in New Zealand. Markets are currently putting 50/50 odds on a cut, which is in fact up from around 40/60 earlier this week."
"We still have one further 25bp cut within our own baseline forecasts (but not until next March). However, we still feel that the most likely outcome is that the RBNZ will ‘watch and wait’ a little longer."
"While recent dairy developments do leave us mindful and the NZD remains relatively high, business and consumer confidence is rebounding, evidence is growing that the economy is regaining momentum, and sectors such as tourism, construction, and broader services continue to perform well."