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RBA Monetary Policy Meeting minutes- 15 May

Written by Sam Coxhead on May 15th, 2012.      0 comments

3:28 PM (NZT)
Offshore markets once again succumb to escalating fears that Europe will erupt in turmoil should the Greeks exit the Euro-zone. As yet the political parties have been unable to cobble together a coalition ,and this points towards another election, and most probably  further movement against austerity measures.
This movement towards loosening the austerity measures is obviously against the context of all bailout agreements from the IMF and EU, and points towards an exiting of the EURO. How this plays out is really unclear, and points towards further risk aversion in the short term.
Meanwhile, the RBA have released the monetary policy meeting minutes. These make for interesting reading. The increased cost of bank funding came into their calculations, and therefore they had to cut more aggressively than normal to impact the lending rates in a material way. This is a not so subtle crack at the record profits being posted by Australian banks  as they increase margins.
At any rate, given the uncertainty in the offshore markets, and slow non-mining domestic economy, further cuts are not out of the equation. Expect further cuts to be assessed on an ongoing basis.
After immediately seeing softer price action, the AUD has seen demand come to the market. Whilst the momentum is still to the downside on most pairings, it will pay to be weary of “short squeezes” in both the AUD and NZ dollar markets.
          Past 24 hours
  Current level Pre-RBA mins  % Chge since RBA Mins   Low High
NZD/USD 0.7760 0.7763 -0.04%   0.7752 0.7827
AUD/USD 0.9967 0.9967 0.00%   0.9950 1.0032
NZD/AUD 0.7786 0.7790 -0.05%   0.7790 0.7808
AUD/NZD 1.2844 1.2837 0.05%   1.2807 1.2837
NZD/GBP 0.4822 0.4824 -0.04%   0.4817 0.4867
NZD/EUR 0.6049 0.6055 -0.10%   0.6029 0.6069
NZD/YEN 61.94 62.00 -0.10%   61.83 62.65
NZD/CAD 0.7780 0.7788 -0.10%   0.7777 0.7824