Halister News

(Bloomberg) -- With RBA expected to hold rates tomorrow, its assessment of domestic inflation and global economic risks will be studied for changes to expectations for an August cut, Bloomberg strategist Michael G. Wilson writes.

• RBA is first G-10 central bank to hold meeting post U.S. jobs data on Friday, which didn’t meet expectations
• 1-month AUD/USD risk-reversals tightened this morning in wake of Friday’s NFP; 1-month volatility below all major moving averages
• AUD long positioning is at its lowest since March 1, giving scope for investors to increase purchases should RBA commentary lead to deferred expectations for a rate cut, which is expected in Aug
  • A cut to 1.5% is seen in August, according to the estimates, though 1Q GDP data showed economic growth accelerated in the first qtr
  • RBA would prefer to wait until Q2 inflation data in late July to make decision, CBA says today
• RBA cited low, broad-based inflation as factor behind May 3 cut, then Governor Stevens on May 24 said the 2% to 3% target band isn’t rigid
  • AUD fell during his comments
• RBA will leave benchmark rate at 1.75%, according to all but 1 of 26 economists surveyed by Bloomberg; the rest see no change; decision due 2:30pm Sydney
  • Latest OIS pricing shows only 7% chance of easing
• AUD/USD down 0.6% to 0.7326