Dovish RBA could smash Australian dollar

This makes plenty of sense, via Westpac:

Reserve Banks of Australia and New Zealand meet

  • swap markets pricing a May rate cut at around a 50% chance for both
  • all we can say with confidence is that markets should react sharply to both rate decisions

Westpac is forecasting no change in Australia and a rate cut in New Zealand.

With the A$ trading today at 0.7000, the risks seem asymmetric.

  • There may be only a (fragile) bounce on no change since the statement should include admission that growth and inflation forecasts have been cut since Feb and the RBA should adopt an easing bias.
  • A rate cut however could be very damaging for the Aussie as markets scramble to price in the next easing and ponder how soft the economy must be for the RBA to cut rates 11 days before the federal election.

A great reason to cut. But it would require the bank to change its spots and they appear welded on. I still expect only a shift to easing bias. Cut in June.


  1. tonyddMEMBER

    Among the deluge of properties that will hit the market over the next 12 months will be hundreds of thousands of properties whose owners intend to repatriate the funds to their ‘home’ or other more favorable country. RBA don’t want to contend with a hot cash flight at the same time, but they are in a parallel universe where facts are just conjured.

  2. bcnichMEMBER

    I think they may cut
    CPI of 0% with high chance CPI around 0% for the year by next January
    I think they have to cut, think probability is 80% of a cut
    Think we may even see 3 cuts this year may aug nov