The market expects no change in the cash target rate. The focus is going to be on the accompanying statement, and, initially at least, in the summing up from Glenn Stevens on the final paragraph of the statement.
This is the final paragraph from the previous accompanying statement – we want to watch for departures in tone (more or less dovish) from this:
- The Board’s view is that with inflation likely to be consistent with the target, and with growth likely to be a little below trend over the coming year, an accommodative stance of monetary policy is appropriate.
- The inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand.
- At today’s meeting, taking into account the flow of recent information and noting that there had been a substantial easing of policy as a result of previous decisions, the Board judged that it was prudent to leave the cash rate unchanged.
- The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target over time.
I broke the paragraph down into sentences. Economists say watch out specifically for this part:
The inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand.
Watch to see if Steven’s still says there is ‘scope to ease policy further’. If he says there is less scope to ease, or he removes references to scope to ease the AUD is vulnerable to a sharp rally.
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Current futures market pricing is implying just an 11% chance of a 25bp rate cut today.
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On the topside – thee are offers 1.0260/80. If we get a sharp rally this could be the target area.
