Currency Talk: OCR cut all but a certainty but what’s next for the central bank?
Jason Walls and Westpac's Imre Speizer discuss the global currency market news on NBR Radio and on demand on MyNBR Radio.
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With cuts to the official cash rate (OCR) now almost fully factored in by the market, the thing to watch this Thursday will be if Governor Wheeler signals more cuts to come.
Westpac senior market strategist Imre Speizer says Thursday’s cut is all but a certainty, as the Reserve Bank said in July it would cut again in September – “using central bank speak.”
Mr Speizer says since the last OCR cut, forecasted GDP growth has fallen and the dairy downturn has only gotten worse.
NBR reporter Jason Walls says it’s more than likely Mr Wheeler will make mention of the downturn and its effects on the regions in the monetary policy statement later this week.
The other big economic announcement on the cards is the US Federal Reserve’s interest rate decision next week.
Market pricing has peeled back in recent weeks after more uncertainty in China.
Although it’s almost anyone’s guess as to whether the Fed will choose to hike rates next week at this point, Mr Speizer is putting his money on an increase next week.
Mr Walls, however, is a little more reluctant to make that call.
“Inflation is still quite low and although job growth is looking good, Fed chairwoman Janet Yellen has always outlined that job growth needed to pick up and inflation needed to tick higher before there was an OCR hike,” he says.
The uncertainty out of China has been a worry for the G20 too.
In a meeting in Turkey over the weekend, members expressed concerns over a potential “currency war.”
Mr Walls says after the Chinese devalued the yuan last month, both Vietnam and Kazakhstan followed suit.
“The devaluation spurred worry that China was up to its old tricks, depreciating the yuan to drive growth and revive the economy,” says Mr Walls.
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NBR Radio
Tue, 08 Sep 2015
Tue, 08 Sep 2015
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Currency Talk: OCR cut all but a certainty but what’s next for the central bank?
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