australian dollar analysis
Published on 07.05.2019 16:43

The Australian dollar is threatening to fall below the US70c mark again in today’s trading session after receiving a boost yesterday on the back of a decision by the Reserve Bank of Australia to keep interest rates on hold.

Some market participants had been expecting a rate cut and when this didn’t eventuate the Aussie dollar jumped in some sort of relief rally but as the fall in the currency today shows, not all believe that a rate cut if off the cards and as the year unfolds at least one or more rate cuts will be delivered.

Considering the state of the Australian economy, RBA Governor Philip Lowe was pretty upbeat, noting the Employment Market was still pretty strong which has now put a burden on the central bank because if the unemployment rate ticks higher of even remains the same a rate reduction is almost a sure thing

"The Board judged that it was appropriate to hold the stance of policy unchanged at this meeting. In doing so, it recognized that there was still spare capacity in the economy and that a further improvement in the labour market was likely to be needed for inflation to be consistent with the target”. Mr Lowe said

"Given this assessment, the Board will be paying close attention to developments in the labour market at its upcoming meetings”. He added.

“No RBA rate cut today, but the hurdle has been lowered. According to the RBA Statement, “further improvement in the labour market was likely to be needed for inflation to be consistent with the target” Said David Bassanese of Beta Shares

“That means the unemployment rate no longer needs to rise (to say 5.5% from 5%) to justify a rate cut, it just needs to stop falling. It has been broadly steady for the past six months, so more of the same will see the RBA move”.


Andrew Masters

Analyst

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