RBA’s Debelle strikes optimistic tone; remains lazer focused on the state of the labour market
We had warned to watch out for dovish noises from the RBA this week after it changed its monetary policy meeting statement earlier in the month to say they are monitoring developments, suggesting they may be willing to consider a rate cut in coming months if downside risks to growth materialize.Watch out for dovish noises from the Fed and RBA; 10 April - AmpGFXcapital.com
However, the speech on the “State of the Economy†on Wednesday by Deputy Governor Guy Debelle sounded relatively optimistic that the deterioration in the outlook since mid-2018 both in Australia and globally may be temporary. The RBA is more watchful, but not yet ready to cut rates.
Debelle highlighted risks to the Australian growth outlook including the clampdown on shadow financing in China and trade tensions, slower household consumption in Australia and a weaker housing market.
However, he sounded more optimistic on the state of the global economy than many market commentators, noting ongoing strength in service sectors and employment and wage growth (globally and in Australia).
He tended to downplay the negative influence the housing market decline may have on the Australian economy.
He suggested that the RBA is lazer focused on the labour market. Provided employment growth continues, unemployment declines and wages growth accelerates, the RBA is unlikely to cut rates. At this time, the RBA still sees strength in leading indicators of the labour market, even though job ads have fallen in recent months. It appears to prefer the vacancy data that rose to a new high in February from three months earlier.
Understandably, in response to Debelle's glass half full speech, Australian rates and the AUD have firmed.
It is fair to predict that the RBA will cut rates later this year, as most market economists have done. However, Debelle and the RBA are not yet convinced this will be necessary. In particular, it appears to need evidence that the labour market is losing momentum, and this may take several months.
Amplifying Global FX Capital was founded in 2015 and is fully owned by Greg Gibbs. It is a registered company both in Australia and Colorado, USA and is licensed in Australia to provide financial services.
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Greg Gibbs is the director and founder of Amplifying Global FX Capital. Greg began his career at the Reserve Bank of Australia in 1989, and in the early 1990s, he was the first economics graduate at the Bank to be assigned to the foreign exchange dealing desk. In 1996, Greg joined Bankers Trust Australia on the FX sales desk covering Australian and international fund managers. In 1999, he joined Westpac Bank in New York and switched to the research side to become the bank’s first FX strategist based in New York, carving out a role covering major currencies. In 2002, he returned to Australia as senior FX strategist at RBC covering APAC currencies, and in 2006 he moved to ABN AMRO in Sydney, reuniting with many of his colleagues from Bankers Trust that were again part of a thriving full-service investment bank. Greg continued to work on at RBS in Sydney as senior FX strategist after it took over ABN AMRO in 2008. He moved to Singapore in July 2012 after the bank consolidated its FX business in Asia, and was appointed Head of APAC Markets Strategy for the bank in February 2014. In early 2015, Greg began to work on establishing his own company, Amplifying Global FX Capital, and launched its website in August 2015 after completing duties at RBS.
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