Australia – Rba on Hold With Easing Bias

After cutting rates to a record low of 2% in May, the RBA is expected to keep the cash rate steady in June. The RBA has an easing bias, reflecting its forecast profile, where the average underlying inflation rate over 2016 is expected to be slightly below the midpoint of the target range, and supported by recent comments by the Deputy Governor who said that “we still have scope to lower rates if we need to”. Barclays notes:

  • We think the bias will have likely been boosted by the unexpectedly poor outlook for non-mining investment from the Q1 capex survey. 
  • Aside from an easing bias, we also expect the RBA to again make the case for further weakness in the AUD exchange rate given the state of commodity prices.
  • As for the economic data, we expect a 0.7% rise in Q1 GDP. China’s PMI will have some bearing on the AUD, and we expect the official manufacturing PMI (Monday) for May to pick up to 50.3 from 50.1 on the back of easing measures and improving liquidity conditions. 

The material has been provided by InstaForex Company – www.instaforex.com

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