Aussie Dollar Traders Should Be Wary Of The RBA Minutes This Morning

Getty/Pablo Blazquez

The minutes from the RBA Board meeting earlier this month will be released at 11.30am AEDT and Annette Beacher, TD Securities’ Asia Pacific Head of Research, reckons this set of minutes might not be as “redundant” as usual.

As a result, she has issued Aussie dollar traders with a “heads up” for a binary impact on the Aussie dollar where it is either going to move sharply higher or lower.

Given the board meeting lasts for hours, it would be impossible not to discuss the level of the AUD, although nothing concrete made it into the February board communiqué.

However, here is a golden opportunity for the RBA to introduce some softer tones into the minutes.

  • (1) AUD lower: we again reiterate that the Board need only mention that the AUD was still at “a high level”. A comment along those lines would dampen the AUD back under $US0.90, as we have no doubt that the RBA doesn’t welcome the AUD with a nine-handle given the decline in the terms of trade.
  • (2) AUD higher: should there be no reference to the high level of the AUD, instead retreating to the non-committal “a lower currency assists with growth” we cannot rule out another spike back past $US0.91 and towards $US0.92. Don’t forget RBA Assistant Gov Kent downplayed the weak labour market report in QnA on Friday at the CEDA conference. If the AUD reaches $US0.92, that is looking toppy compared with our forecast horizon ($US0.87 by year end).

As is clear from the chart, the last time the RBA omitted a reference to the AUD level was in October (blue) whereby the AUD rallied three cents to $US0.97. Here we are four months later and we see a repeat pattern.

Will the RBA take the opportunity to talk down the AUD in the minutes, or wait for the March board meeting communiqué?

Traders, you have been warned.

Disclaimer: Greg McKenna id an active currency trader who is STILL short the Aussie

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