One of the local Australian banks put out a note today, saying the the RBA is much more likely to act in November than it is in December. In other words, if they are going to cut rates by another 25 bps before February, then they will likely do so tomorrow or not at all (no meeting in January). The market is pricing in a 57% chance of a rate cut and 15/20 economists polled by Reuters came down on the ‘cut’ side.
I might be reading too much into this, but the outspoken public interviews given by board members Ridout and Broadbent earlier this month, where both spoke at length about the issue of the high AUD, are surely significant events. If the RBA does nothing, the AUD could be at 30 year+ highs against the USD when they reconvene in February so that’s why I expect at least a 25 bps rate cut and some additional language regarding the high AUD. The RBA has been tacitly intervening by not going to the market to sell their usual amounts of foreign currency and I think they will take this ‘intervention’ one level further tomorrow.
Whatever happens, we are in for an exciting few days with the US election and the Chinese NPC also on the agenda. May you live in interesting times! See you tomorrow.