ASIA MORNING: Further clarity on RBA rate path

*AUD sees minutes and housing data
*SEK could remove hiking bias
*USD funding in demand

Last 10 years of Home Price Index (orange) vs Consensus (blue). Source: Eikon

Have Australian house prices bottomed... 

At 11.30am AEST we catch detailed monetary policy minutes for the recently passed September RBA meeting, as well as, the Q2 print for the Aussie Home Price Index (HPI).

Both should garner close attention given key statements made by Philip Lowe during the RBA's September 3 meeting. He mentions Australia's "growth is expected to strengthen gradually over the next few years" with the outlook for spending supported by "signs of stabilisation in some established housing markets". Therefore, how HPI prints today will feed into the broad data set monitored by the Board in order to decide whether to "ease monetary policy further" in October. 

In my view, a beat in the Q2 HPI print, consensus currently at -0.1%, would go far in confirming the positive rhetoric that has been floating around the Australian housing market as of late. That is, Australian house prices - especially in major capitals Sydney and Melbourne - have potentially bottomed. However, I think we're more likely to see upside risk to the Q3 HPI print rather than Q2's given we only saw rate cuts in June (end of Q2) and July (early Q3). Seeing as the last two prints have also missed (-3% vs -2.5%e, -2.4% vs 1.9%e), it doesn't fill me with great confidence. 

In combination with the Q2 HPI print, markets will look to gain further clarity from the minutes on the RBA's forward rate path, and in particular, whether October leans towards "live" status. At the moment, markets are currently pricing in a 73% probability of no change in October. 

AUDUSD implied volatility has already ticked higher this morning. I think, unless we see a significant shift in rate guidance, AUDUSD sticks between 50D-EMA support (0.6845) and 100D-EMA resistance (0.6901).

The Riksbank sees minutes... 

Recent September data prints which saw Sweden y/y GDP grow at a sluggish rate (1.0%) and y/y inflation miss expecations (1.4% vs 1.7%e), could have less hawkish read-through to tonight's published minutes for The Riksbank's September 4 meeting. 

Markets are paying extra attention to whether the Riksbank potentially lessens the intensity of their hiking bias, or even more, drops it altogether. Either way, I would lean on the bullish side of USDSEK through the announcement tonight at 5.30pm AEST


USD funding in demand overnight...

As an interesting side point, last night's price action in US funding markets were dominated by US corporates trying to get long USD liquidity because of Q3 Corporate Tax Day.

The FRA-OIS spread tightened significantly, up 3bps, implying the system is very short of dollar liquidity. FX markets were heavily impacted with participants looking to borrow USD. The US Dollar Index was bid +0.5% across the night.

It begs the question, could QE be needed to shore up a dry market? 

December FRA/OIS spreads have been spiking. Source: Bloomberg