Aussie dollar faces rate cut
Published on 04.02.2019 20:57

The Australian dollar is down in today’s trading session after a round of disappointing data has fueled speculation that the next move in interest rates from the Reserve Bank of Australia may be up, not down
Australian job advertisement figures slumped 1.7 percent in January and are now 3,7 percent lower than the previous January reading which is a real blow to the local economy as the Jobs market had been one of the brightest sectors in an otherwise gloomy outlook.
The news adds to falling property market and now brings new meaning to this week’s interest rate decision from the RBA where this time around, no changes in rates are expected but the following monetary statement may lean towards an easing bias which will hit the Aussie dollar.
"Domestic housing market weakness is encouraging speculation that the RBA will be forced to ease monetary policy later this year," warns Lee Hardman, a currency analyst at Japan's MUFG.
“It is from this perspective that market participants will be assessing the upcoming RBA monetary policy meeting. The Australian dollar would be vulnerable to further weakness if the RBA signaled that they beginning to shift to an easing bias. However, it may still prove too soon for the RBA to make such a dovish shift," he added. 
This shift remains to be seen but the RBA cannot tolerate inflation below 2 percent for much longer where it has been for years and is below the target rate of between 2 and 3 percent.
In the end it looks as if the only way to push inflation higher is to reduce rates which may encourage consumer spending ad add some life to the dire housing market.


Andrew Masters

Analyst

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