Jump to content

Anticipation builds for the RBA meeting; a crucial decision on cash rate


Recommended Posts

As the Reserve Bank of Australia (RBA) prepares for its August meeting, financial markets keenly await the decision on the official cash rate. Will the RBA hold steady or surprise with a rate hike?

 

original-size.webpSource: Bloomberg

 

 Tony Sycamore | Market Analyst, Australia | Publication date: Monday 31 July 2023 

The Reserve Bank Board of Australia is scheduled to meet tomorrow, the 1st of August, at 2.30 pm in what is expected to be yet another line ball decision.

The backdrop

At its Board Meeting in July, the Reserve Bank of Australia kept its official cash rate on hold at 4.10%. The RBA's decision to keep rates on hold was largely expected by the rates market (80% priced). In contrast, about two-thirds of the forecasting community predicted a rate hike.

The RBA's reasons for staying on hold echoed partly why it paused its rate hiking cycle in April - to assess the impact of a cumulative 400bp of rate hikes over the past fourteen months. "The decision to hold interest rates steady this month provides the Board with more time to assess the state of the economy and the economic outlook and associated risks."

RBA cash rate chart

 

RBA-cash-rate-31jul.pngSource: RBA

RBA meeting focuses on incoming data

The RBA meeting minutes for the July Board meeting put the focus firmly on incoming data ahead of the RBA's August Board meeting.

"At the August meeting, the Board would have the benefit of additional data on inflation, the global economy, the labour market, and household spending, as well as an updated set of staff forecasts and a revised assessment of the risks."

Following downside surprises last week in inflation (6.0% YoY vs 6.2% expected) and retail sales (-0.8% vs 0.0% expected), we think it will be enough to see the RBA keep its cash rate on hold tomorrow at 4.10%.

The RBA will likely retain a tightening bias due to elevated services inflation and a tight labour market - factors that will likely see one more hike before year-end to 4.35%, in line with current pricing in the interest rate market (see chart below).

ASX 30-day interbank cash rate futures implied yield curve

 

ASX-30-Day-Interbank-Cash-Rate-Futures-ISource: ASX

AUD/USD technical analysis

The AUD/USD closed lower last week at .6648 (-1.11%) following softer-than-expected Australian inflation and retail sales data, which saw it break below the 200-day moving average currently at .6728 and accelerate lower towards .66c.

While the AUD/USD remains below the 200-day moving average, we hold a mild negative bias and expect it to probe support in the .6575/55 area. While it's not our base case, (given how well-supported this area has been in the past), a sustained break below .6575/55 would then expose a move towards .6400c.

Aware that if the AUD/USD were to reclaim the 200-day moving average at .6728 post the RBA meeting, it would alleviate downside risks and see another rotation higher towards .6820.

AUD/USD daily chart

 

daily-asx-Yield-Curve.pngSource: TradingView

 

  • TradingView: the figures stated are as of July 31, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • NASDAQ 100 (NDX), SP500 (SPX), Apple (AAPL), Tesla (TSLA), Amazon (AMZN), Nvidia (NVDA), Microsoft (MSFT), Meta Platforms (META), Netflix (NFLX), Alphabet (GOOGL), Bitcoin (BTC). Stock market Elliott Wave analysis and trading strategies:  Elliott Wave Analysis for NASDAQ Tech Stocks and SP500: Navigating the Correction Phase NASDAQ 100 (NDX) and SP500 (SPX) are currently in an intermediate or primary wave four, marking the first leg of a correction. Expect a minimum three-wave swing due to the complex nature of wave four. Consider taking partial or full profits during the B wave rally, or ride out the correction if positions are not leveraged. Analysis suggests multiple possible counts for NASDAQ, with one indicating a top, though this seems unlikely for some individual stocks. Stay updated for optimal trading strategies. Video Chapters 00:00 NASDAQ 100 (NDX) SP500 07:06 Apple (AAPL) 09:38 Amazon (AMZN) 12:47 NVIDIA (NVDA) 16:29 Meta Platforms (META) 18:10 Netflix (NFLX)  19:17 Alphabet (GOOGL) 20:53 Microsoft MSFT 22:16 Tesla (TSLA) 26:23 Bitcoin 28:16 End Analyst Peter Mathers TradingLounge™   
    • With OKX announcing its exit from the Nigerian crypto market by August 16, 2024, it's time for Nigerian crypto enthusiasts to explore new and reliable platforms. One such platform is Bitget, which offers a robust Peer-to-Peer (P2P) service, ensuring seamless and secure transactions. Why Choose this exchange? Efficient P2P Service: The exchange P2P service allows you to trade directly with other users, providing flexibility and control over your transactions. User-Friendly Interface: The platform is designed to be intuitive, making it easy for both beginners and experienced traders to navigate. Security: With advanced security measures, this exchange ensures your assets are protected. Diverse Trading Options: The exchange supports a wide range of cryptocurrencies, giving you the freedom to diversify your portfolio. As the crypto landscape evolves, staying adaptable and exploring new platforms like Bitget can help you continue your trading journey smoothly. Don't let the exit of OKX hinder your crypto activities. Embrace the change and discover the benefits of trading on this platform today!
    • 21st July and still no CTC (Consolidated Tax Certificates), when will they be available?
×
×
  • Create New...
us