RBA bearish on Chinese prospects, worried about high AUD
Recent Australian economic data has been running pretty close to trend so the reasons behind the 25 bps rate cut are that the RBA is very worried about international economic prospects and it doesn’t want to be left standing still whilst the Fed/ECB etc are racing to the bottom. They will use monetary policy to limit the AUD rise (and as they showed recently they are also willing to sell into rallies).
The RBA has a deeper insight than most into both Chinese economic prospects and central bank policies so what does this tell us about the immediate future? Based on this decision, risk trades might be set to struggle for the rest of the year.