From Dave de Garis at NAB, which broadly reflects my take:
** RBA holds to core Aussie view: With the market priced towards an expectation that the RBA would shift away from its core Australian trend growth/ sticky inflation story, it wasn’t a surprise after the post meeting statement from the Governor that held to that core view that rate markets sold off and the AUD rose.
** Overnight some press reporting points to the RBA’s holding to this core view as helping to alleviate some concerns for global investors with resource stocks doing especially well. We note that base metals have held their ground of late but we also note that the spot iron ore import price out of China has had quite a pull-back over recent weeks and declined by another 3.2% yesterday. Still high but certainly one to keep an eye on.
** While the RBA held to its core view on Australia that the economy’s output would grow at a trend pace over the year ahead and inflation would remain in the upper half o the range, my read of the statement’s tone was a less hawkish one. They noted that US and China were OK but with some growth slowing aspects, China to a more sustainable pace and the US a still tepid labour market. They harboured inevitable concerns for Europe give public debt and some European bank concerns.
** We would not wish to overstate it, but we detected some shift in the language of the statement to elicit a degree of caution about the global economy and markets. From here we expect the RBA to remain on hold and it will probably take a higher Q2 CPI on July 28 for them to entertain a hike at the August Board meeting. We forecast 0.6% for underlying CPI (also the RBA’s forecast) that would see them on hold.
