The Reserve Bank surprised very few traders with its decision to cut rates by 25 basis points to a record low of 1.5% at today’s board meeting.
But it seems that even though it left no explicit bias to cut rates further, the fact the bank mentioned the complications that the stronger Aussie has brought to Australia’s economic growth has some traders thinking that more rate cuts are on the way.
That said the RBA is having a bit of an each way bet when it comes to the Aussie dollar.
Governor Stevens said (my emphasis) :
Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 is helping the traded sector. Financial institutions are in a position to lend for worthwhile purposes. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.
That’s perfect economist “on the one hand, on the other hand”.
So the Aussie is under a little pressure but finding support just above 75 cents at the moment.
A short time ago it was trading 0.7517.