August 2, 2016

Australian Markets Weekly: 1 August 2016

The market has continued to price toward the likelihood that the RBA will cut rates again at tomorrow’s Board meeting, pricing in this morning a 64% chance of an easing, with 36 of 47 economists surveyed by Reuters on Friday forecasting a cut this week.

RBA decision need not be so knife-edged

Key points:

  • Inflation was right in line with RBA May forecasts
  • NAB continues to see no new case for the RBA to ease further
  • On reflection, Q1 underlying inflation was more the outlier
  • Even though risks continue, the outlook for growth and inflation has not deteriorated
  • Market price reaction more if the RBA remain on hold tomorrow
  • Retail Sales, Building Approvals, and International Trade also due this week
  • Offshore this week:  More important US data points, including ISMs, PCE deflators and payrolls; Japanese Government stimulus package tomorrow and BoE Thursday

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