100
Currency Analyst since 2010

RBA: markets expect a rate cut

The Reserve Bank of Australia will announce its interest rate decision tomorrow at 04:30 GMT. Swaps data from Bloomberg suggest that markets are fully pricing in a 25-basis-points cut to 2.5%. The RBA’s monetary policy statement will be released on Friday.

Last week the RBA Governor Glenn Stevens said that “the inflation outlook may afford some scope to ease policy further if needed to support demand”. Retail sales grew at their weakest pace in 51 years in the year to June 30, 2013. “The unemployment rate is still rising and that economic growth is still below trend, business and consumer confidence remains subdued and non-mining-related spending restrained,” says ANZ.

AUD/USD renewed 3-year low sliding to $0.8847, to the 100-month MA. Last week the pair lost more than 300 pips and closed below the psychological level of $0.9000. In the short-term Aussie is oversold which allows some consolidation ahead of further losses. The outlook for the pair will remain negative as long as it stays below $0.9388/9400. The first target lies at $0.8550.  

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