Nordea Research discusses AUD outlook around this week's RBA policy meeting. Nordea sees a scope for AUD upside especially on the crosses against NZD.
"One of the main culprits behind the weak Australian Q1 CPI is the housing component, so is it out of this world to think of targeted measures aimed at the housing market instead of an outright rate cut? It was mulled in AFR last week that RBA could lower the minimum rate that banks use to asses home owners repayment capacity instead of cutting the cash rate. We see a decent risk/reward in betting on an unchanged cash rate," Nordea notes.
"Our decently upbeat AUD story still hinges on the usual lagged pass-over from Chinese stimuli to Australian data. We find roughly 15 months of response time between Chinese stimulus (lower CNY rates) and a rebound in AUD – the jury is still out on that correlation," Norea adds.