Forex Flash: RBA signals scope for easing – BTMU

Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that the RBA monetary policy quarterly statement was released overnight and again the signal was clear that there remains scope for monetary easing given the inflation outlook.

He sees that the RBA now estimates annual inflation at 3.0% for the year ending June, down from 3.25% before while its real GDP estimate was cut from 2.75% to 2.50%. Additional monetary easing is coming, probably at the next meeting on 5th March. Probably the highlight for us though in terms of interesting data came from Japan with the Economy Watchers’ Survey revealing a surge in confidence.

He writes, “The Outlook component of the household survey revealed a massive jump from 51.0 in December to 56.5 in January, just below the record high of 56.6 set in 2006. The two-month jump in the index is the largest since the aftermath of the earthquake and is an indication that Abe’s arrival and the stock market surge is having a notable impact on confidence. There is as of yet no clear indication of increased retail outflows from Japan but a sustained increase in confidence would be an important development in increasing retail outflows from Japan to weaken the yen.”