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What did us learn from Lowe last week?

Forex, video, latest March 15, 2021 3:02 pm



a main takeaway from Governor Lowe is that he is insistent that a RBA do not want to raise interest rates sooner than 2024. Lowe was explicit inside this by saying that a RBA do not share a markets expectations of rate increases inside 2022 also 2023. a RBA added that a board become consider a case for extending bond purchases later inside a year. a RBA also had a repo tweak last week that some may has missed. inside a nutshell they has announced that a borrowing of a 04/2023 also 04/2024 bonds become become done by their own facility. a significance of that is that their facility has a fee of 100bps vs a usual 25bps fee. a prospect of shorting these 3 year yields bonds, to move rates above 0.10%, now looks very unlikely.

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Lowe just doesn’t want to move before a Fed

Despite a threat of further bond purchases potentially coming Governor Lowe said that a RBA are already doing a large amount of QE also it is ‘sensible to see how a economy develops’ before deciding on further QE. a way to read a RBA is still that they don’t want to move before a Fed. See this for an earlier piece I has written on that. Governor Lowe’s speech just puts more focus on a Fed’s meeting this week. If a Fed start talking about earlier rate rises then a RBA become likely start toIkutisuit. They just don’t want to become a first to declare a coming rate rise.

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There is now some space opening up between a RBA also a RBNZ. Although Governor Orr is trying to signal a similar stimulatory policy investors has been giving a 29% chance of a RBNZ hiking rates this year. This percentage can grow as:

  1. NZ has already purchased enough vaccines for a whole country also;
  2. Q4 GDP data out this week may signal a economy is on a sure footing.
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These points should open up a AUDNZD sell bias that could widen, but keep an eye on a bond yield spread.

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