RBA: Monetary policy statement looked upon for fresh insight - BBH

Research Team at BBH, suggests that the negativity toward the US dollar is offsetting the rate cut in Australia while the rate cut by the RBA was widely anticipated. 

Key Quotes

“The cash rate now stands at 1.5%.  There was no forward guidance and the monetary policy statement at the end of the week is now looked upon for fresh insight. 

On the face of it, the rate cut would appear to push the central bank back into a holding pattern, for what may be an extended period.  That said, the June economic data was particularly poor.  The trade deficit widened to A$3.195 bln from a revised A$2.418 bln in May (from A$2.218 bln initially).  Separately, building approvals unexpectedly fell 2.9% in June after a revised 5.4% drop in May (initially -5.2%).  The median forecast was for an increase of nearly 1%. 

On the rate cut, the Aussie spiked lower by about half a cent to $0.7490 but quickly rebounded.  It is now back above the $0.7560 area, where it generally held above in North American yesterday before breaking down in late dealing ahead of the decision.  Offers near yesterday's highs (~$0.7620) may stem today's advance.  The Australian dollar's gains may be being helped by flows in the bond market.  The 1.8% yield on the benchmark 10-year bond, a triple-A credit, may be drawing foreign interest.  A month ago it was yielding around 2%.”