The Reserve Bank of Australia (RBA) hold their monthly policy meeting today. The announcement is due at 0430GMT, along with the publication of the accompanying statement.
There is no expectation of any change in the cash rate target, it will be left unchanged at 2.5%.
Attention will turn to the accompanying statement.
- Chatter around the market is that the RBA may lean a little more dovish – consumer confidence is slipping and this will impact on household consumption. The May 13 budget did little to increase confidence and the loud and persistent complaints over the budget continue to dominate the media in Australia.
- A lean to more dovish is unlikely to translate immediately into a market perception of an imminent rate cut, and while there is little expectation of a rate cut, it would lead to a repricing of the chances of a cut
- For the Australian dollar, there is also market talk that they RBA is likely to attempt again a talking of the currency lower. At the very least, there is an expectation that the accompanying statement will mention that the “AUD remains high given falling terms of trade” (i.e falling iron ore prices) … or words along those lines. Its been a good few months since the RBA has seemingly given up on its attempts to jawbone the currency lower, today might see some return to that attempt.
- Its worth noting that its not only iron ore prices falling – the RBA’s own index of commodity prices fell 1.3% m/m in April, and down 12.5% y/y
- Late yesterday the latest Commodity price index came out, for May, showing the y/y down 12.8% now (down 1.1% m/m)
- Given the fall in the AUD over the past 24 hours, some of this expectation of a potentially more dovish RBA and a talking down of the currency is seemingly reflected in the move
