It’s the first Tuesday of March and it time again for the Reserve Bank of Australia (RBA) to decide on current Cash Rate levels in Australia. The market is expecting movement today as the Australian Cash Rate is expected to be slashed again for the second consecutive month. This could potentially push the AUD lower against the major Currencies.
Yesterday, Australia released several low to medium tiered economic figures; the figures were new home sales, Company Operating profits and Commodity Prices Year/year. It was a mixed batch of results, first to be released was New Homes Sales which came out at 1.8%. The figure was released at -1.9% last month so overall the market assisted the AUD momentarily. The positive housing figure was to be expected as it was mainly due to the Positive externality from the Interest Rate cut last month; as when home loans are cheaper, it incentivises home purchases and builds.
The second release out, Company Operating Profits, came in well below expectations of 0.7% at –0.2% growth for the first quarter of 2015. This was probably the most important figure out yesterday; unfortunately it hindered the AUD/USD, as the pair fell 0.3% following the announcement. Commodity Price data yesterday showed a fall of -20.6% year on year which was even worse than Januarys figure of -19.2% year on year. These two figures did not give the AUD much buoyancy yesterday against the Majors; USD, GBP and EUR.
Today, the RBA will announce whether or not Interest Rates in Australia are due for a trim, with many economists predicting a further cut of 25 basis points. Over the last two business days the probability of an Interest Rate cut has moved to 60%. The probability of a cut for the majority of last month sat around 50%. As there have been weak Employment figures, sluggish inflation levels remaining below official RBA targets and a stubbornly high AUD; there is a strong case for the cut. Alternatively, with property prices increasing to unsustainable levels in most major cities in Australia; further cuts would just be adding fuel to the overinflated housing markets.
The choice is between the lesser of two evils, the decision will be made this afternoon 2.30 pm AEST; whatever the decision, there will be plenty of movement in the AUD against all majors and minors.