Sean Callow, analyst at Westpac, points out that the RBA’s cash rate cut to a record low 1.0% was clearly flagged by Governor Lowe beforehand and in the statement and subsequent speech, Lowe reiterated that the rationale for cutting at consecutive meetings was not a deteriorating growth outlook but a desire to drive the unemployment rate lower.
“But is there more to come? The statement repeated June’s final paragraph, with the eye-catching exception of saying further adjustment would occur “if needed”. It seems the RBA will make limited changes to its key forecasts in the August quarterly statement. In the meantime, the RBA will no doubt be pleased to see agreement in Canberra this week to pass income tax cuts. This points to a period of steady rates.”
“However, the RBA will “continue to monitor developments in the labour market closely” and we expect they will see some softening in jobs growth and higher unemployment.”
“Our base case is another cut in Nov 2019, to 0.75%. But we also expect the Fed to have cut the funds rate 25bp by then, keeping the AUUS cash spread steady. After that, further Fed easing will trim the discount on the AU cash rate. Markets lean towards yields moving back in AU’s favour next year.”
“In the week ahead though, whether AUD/USD can extend its recovery to 0.71+ probably depends most on Jay Powell.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.