The RBA has just released the minutes of this month’s board meeting at which time it made a decision to cut rates by 25 basis points to a modern day low of 1.75%.
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The RBA said they would wait for more macro data before implementing any further policy easing, meaning that should the performance of the Australian economy improve, the regulator will stick with tighter monetary conditions.
Australia’s unemployment is at a two-and-a-half-year low, while consumer sentiment is at its 2014 high. Some predicted there would be a rate cut next month or in August, while others have suggested interest rates could fall below 1% in the very near future.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was steady at 94.49, not far from Friday’s three-week high of 94.84. The dollar was down 0.1 percent at 108.92 yen while the euro shed 0.1 percent to 123.25 yen. The G7 meeting could expose a rift on issues ranging from currency and fiscal policies within the group of advanced economies, dashing Japan’s hopes for a coordinated policy response.
That’s up from 1.63 percent in the last survey in February, which was the lowest since June 1994. The “remain” camp was ahead of “leave” by eight points in the latest ICM telephone poll released on Monday, though poll results have fluctuated widely.
The major data focus on Tuesday is US inflation due at 1230 GMT.
The Australian dollar was the biggest climber among major currencies, gaining as much as 1.2 percent against its US counterpart.
However, RBC Capital Markets chief economist Su-Lin Ong said a June cut couldn’t be ruled out given the central bank’s lowered inflation forecasts. But Lacker is not a voting member of the Fed’s policy-making board this year, and markets have all but priced out a move next month. That’s because while the cut caught around 50% of market forecasters by surprise the big reduction in inflation forecasts in the RBA’s quarterly Statement on Monetary Policy blindsided everyone and has triggered an unprecedented race by economists and forecasters to call a lower likely terminal cash rate from the RBA in this cycle.
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Traders were waiting in anticipation of what many believed were the most important minutes in years.
