News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.



Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events


Economic Calendar

Economic Calendar Events

Free Trading Guides
Please try again
More View more
Real Time News
  • Gold prices are pushing higher so far this week and the FOMC is waiting in the wings with their September rate decision. Get your market update from @JStanleyFX here:
  • RT @CEOAdam: SO FASCINATING! Dogecoin Poll was by far my highest ever read tweet. In 24 hours, 4.2 million views, my most ever retweets, mo…
  • Just checked the Fed's website to see if they accidently release the SEP (Summary of Economic Projections) early by accident - happened once before. Nope, not live yet; but this will be the link when it is:
  • Gold Price Forecast: XAU/USD Holds Support Ahead of the Fed - Gold Levels $Gold
  • RT @IGcom: What to expect from FED today? Join @JeremyNaylor_IG and @MartinSEssex live on the IG platform at 18:50 (UK) for the live announ…
  • AUD/USD is little changed from the start of the week following the limited reaction to the Reserve Bank of Australia (RBA) Minutes. Get your $AUDUSD market update from @DavidJSong here:
  • China's Anqing City of Anhui province says the property firm linked to Evergrande failed to make payment for land site
  • The updated dot plot will be a major focus for today’s FOMC announcement — perhaps even more so than taper timeline language. This is because Fed Chair Powell’s speech at Jackson Hole emphasized the decoupling of balance sheet normalization from future rate liftoff. $USD $DXY
  • UK energy supplier collapses now affect about 1.5mln households
  • It's #FOMC day and the markets are clearly tuned in. How will markets trade around the policy update? DailyFX's @JohnKicklighter discusses below!
AUD at Risk if RBA Engages in Macro-Prudential Policy?

AUD at Risk if RBA Engages in Macro-Prudential Policy?

Gregory Marks,
AUD Currency Bills

Talking Points:

-RBA parsing words on AUD overvaluation in the context of inflation data.

-Higher inflation on the back of rising home values poses challenges for the RBA.

-RBNZ style, non-standard, macro prudential measures to follow?

Last summer as the Reserve Bank of New Zealand struggled with the need to keep rates low under relatively weak data in the context of rising home prices (and thus higher inflation levels), the central bank decided to embark on an unconventional policy of their own. Defined as ‘macro-prudential policy,’ the term refers to a wide range of tools and policies that a monetary institution could put into place in order to curb systematic risk in a domestic economy. These tools have served useful for the RBNZ as their loan-to-value ratio (LVR) restrictions helped curb the rise in home prices since summer and therefor have helped push back the need for rate hikes until just recently. The central bank estimates that the LVR restrictions have been worth up to 50bps of rate hikes that they would have had to implement if not for the macro-prudential policy measures.

As Chinese demand for Australian property continues to push up prices and take inflation along for the ride, questions arise as to the Reserve Bank of Australia’s next move. Only two times over the last two decades have we seen the spread between Australia’s YoY CPI level and the RBA’s cash rate target turn negative. When the last CPI figure came in at 2.7% we saw the third instance of this negative spread occur.

AUD YoY CPI Figures Chart

Risks for Australian growth moving forward should not be dismissed as the labor market continues to soften and risks out of her largest trading partner (China) remain large in the second and third quarter. In that context, the RBA is likely to remain cautious in regards to any rate hikes and may take a similar approach as the RBNZ in order to delay those rate hikes. Grant Spencer of the RBNZ recently sat on a panel with RBA Gov. Glenn Stevens in Hong Kong and they discussed central bank policy moving forward. Spencer has been a leading force in advocating for macro-prudential policy as an added tool for central banks and Stevens did in fact praise what the RBNZ was able to accomplishwith the LVR restrictions.

It is important to note that in this context and in regards to possible price action for the AUD if such a path were to be taken, when the RBNZ first announced the LVR restrictions we saw Kiwi weakness for those weeks following. Market participants should continue to watch home price data out of Australia as well as upcoming CPI figures.

AUD Inflation Comparison Chart

Gregory Marks, DailyFX Research Team

Keep up to date on event risk with the DailyFX Calendar.

How does a Currency War affect your FX trading?

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.