Market News & Analysis

ASX200 & AUD higher as focus moves to RBA rate decision

May 7, 2019 | Market Update

High-impact economic news:

2:30 pm AUD Cash Rate 40% expect cut to 1.25% – RBA Rate Statement

Today’s RBA rate decision is now the focus after better than expected retail sales data helped maintain gains on the AUD and ASX200. March retail sales data rose to 0.3% beating 0.2% expected by the market. The AUD gained 10 pips on the release. The ASX200 has bounced back after U.S. markets cut back loses in last night’s session. Stocks rebounded after news China will send a new trade delegation to Washington easing some of the pressure seen after Presidents comments outlined new tariffs to come into effect on Chinese good this coming Friday. The ASX200 sits 44 pts higher at this stage in the session. 

Attention is on the RBA, some forecasts are looking for a cut of 25 basis points in today’s meeting at 2:30 pm. Experts are divided on what the local central bank will do today, the general consensus is a 40% chance of a rate, but those odds can also be closer to 50% depending on who you’re talking to. That’s really how close it is atm. 

ANZ’s Cherelle Murphy is betting on a 25-basis-point rate cut.

“Markets are pricing in around a 40 per cent chance of a rate cut at today’s meeting,” said Commonwealth Bank’s Kim Mundy.

“NAB’s view is that the RBA will cut rates over the next few months, but we narrowly favour rates remaining on hold this month with the bank adopting a clear easing bias instead,” NAB’s senior foreign-exchange strategist Rodrigo Catril said.

If we do see a move lower today it will be the first time since August 2016 that the official cash rate has changed. With expectations so close its harder to gauge a response from the market. If there’s a cut it’s just about a sure bet the AUD will drop on the short term. A hold could see short term bounce but with expectations growing for a cut in August it could only be short-term depending on the outcome of the current US-China trade talks and trade deal. 

Either way, it’s good to have a semi-exciting RBA meeting for a change. 

AUDUSD 1Hour Chart

Good trading from EightCap

Sources – ABC 

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