AUD/USD drops 20 pips after RBA minutes talk of rate cut

The minutes of the Reserve Bank of Australia’s May 7 monetary policy meeting released soon before press time said a rate cut would be appropriate if the labor market shows no further improvement, sending the AUD/USD pair down by 20 pips to a session low of 0.6905. 

The minutes also dropped the line that the board saw “no strong case” for the near-near-term policy move, while adding that the outlook would be less favorable without an easing in policy over the next six months. 

Further, the minutes stated that risks to the household consumption growth and global economy are tilted to the downside.

All-in-all, the dovish set of minutes released today confirm the central bank is closing on rate cuts and will likely deliver at least two in the next seven months. 

The markets, however, seems to have priced in the move over the last couple of months. After all, the central bank ditched its long-held tightening bias in early February. As a result, the AUD may defend the 0.69 handle for now, although worsening of risk sentiment due to deepening US-China trade tiff could send the pair well below the psychological support during the day ahead. As of writing, the pair is trading at 0.6910.

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