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Investors See Almost Certainty to RBA Rate Cut Next Week

Posted by WorldWideMarkets . on Jul 31, 2013 3:27:00 AM
Australian dollar tradingRate futures are pricing in a 90 percent probability that the Reserve Bank of Australia will cut the benchmark interest rate to 2.5 percent from 2.75 percent at the meeting on August 6. There are two catalysts for that expectation and the corresponding drop in the aussie. In a speech RBA Governor Glenn Stevens said that inflation was not a pediment to a cut in interest rates if necessary to support the economy while at the same time highlighting the challenges Australia will face as the mining boom comes to an end. That would have been enough to send the dollar lower and signal lower rates but on the back of weak building approvals, a drop of 6.9 percent in June versus an expectation for a 2.3 percent rise, there is almost no doubt that the RBA will cut rates. Expect the AUD sub 90 U.S. cents in the near term with talk of the next base at 85 U.S. cents. It may not take much to send it there. The most recent low was 0.8998 on July 12. Recent action sees the aussie bouncing along the lower 20-day simple Bollinger band.

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