Australian dollar awaits RBA decision

Financial and commodity markets analytics

The Australian dollar has pulled back against its US counterpart in late trading today, giving back some of the gains after last Friday’s disastrous numbers from the US.

At 7.02pm (GMT) the Aussie dollar was trading at US75.67c down from US76.00c at close of trade on Friday.

Weighing on the local currency today, is tomorrow’s interest rate decision from the Reserve Bank of Australia where most economists expect the central bank to cut the cash rate from 1.75 percent to 1.5 percent in order to boost inflation which is sitting well below the RBA’s target range.

There is a risk for the RBA by cutting rates as it may further inflame the housing market, but it seems they are left with little or no choice if they want to boost the inflation figures.

Even if they do decide to cut rates it may have very little effect on weakening the Australian dollar as such a move is already priced into the market.

 “We remain of the view that the RBA will need to cut rates further, dragged down by a disinflationary outlook,” said James McIntyre, an analyst at Macquarie Research.

 “But with easing elsewhere, those rate cuts are unlikely to deliver significant A$ weakness. Rather, rate cuts are now likely to be needed to contain A$ upside,” he said.


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