Will we get an August RBA cut?
Many in the market are now of the view that the RBA will cut rates again in August. I’ve given this some thought and while we did call the May cut perfectly correct (despite consensus being wrong), I’m not convinced we will get one in August. To me it’s 50/50 at best.
The biggest problem the RBA has is the Australian dollar flirting with the high US$0.70 range but that is not reason enough to cut rates. I’m of the view that the RBA needs to keep the door open and hammer home the point that it was a close call – either way.
Business confidence is improving, unemployment is largely contained and the fears we had a few weeks ago around Brexit and global contagion are now there anymore. Base metal prices are basing, China is not in the headlines anymore and the Japanese economy has taken a fair bit of confidence from the recent Abe win at the election.
We’ve just had a messy election and despite that, the stock market has hit new highs. So overall, I can’t really see any panic from the RBA around the inflationary outlook. If we do see Aussie dollar weakness this week on the back of an RBA cut expectations, I would be a buyer.
It’s a close call but I’m just not convinced. I’ll update you in a week’s time with enough notice before the August meeting. Aussie dollar looks strong to me at these levels.
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Chief Market Analyst
Peter Esho is a member of Invast’s Investment Committee and Chief Market Analyst at Invast Financial Services in Australia. The Invast’s Investment Committee constructs professionally constructed global thematic portfolios of Direct Market Access (DMA) CFDs over highly liquid global shares and ETFs through its new PortfolioInvestor platform. Since 1960, the Invast Group has grown to become one of the largest and most successful global brokerage firms, offering state-of-the-art trading technology and unparalleled service catering to all levels of traders.
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