As widely expected, the Reserve Bank of Australia (RBA) last week decided that rates would remain unchanged. The accompanying statement saw the RBA pulling out both hands – making things as vague as possible.
On the one hand they’re seeing signs of a rebalancing away from mining (though things are uncertain here), buton the other hand they think the exchange rate is still “uncomfortably high” and they were more definite about that this time and the need for it to be lower.
In other words, their intentions are ambiguous and that’s exactly how I think they want it at the moment – an each way bet until there is clearer direction from the US Federal Reserve. Financial markets still have a slight easing bias priced in as well as rate hikes in the back end of 2014 (refer chart below).