A preview of the Reserve Bank of Australia announcement and statement today, which is due at 0430GMT (Tuesday 02 August 2016)

  • The current cash rate target is 1.75%
  • 20 of 25 economists polled by Bloomberg expect a cut (prior to the Q2 CPI release last week, 24 of 25 had been expecting a cut. 4 have thus changed sides, citing inflation being at the RBA target and the bank will therefore not move today)
  • The latest OIS pricing I have seen puts the probability of a cut today at 64%

Last week I posted up a view from ANZ on the AUD, with a (very) brief summary of their assessment of the positives and negatives of the Australian economy. Its good for a 'in a nutshell' view:

Positives:

  • Domestic growth has surprised on the upside
  • Iron ore has maintained gains
  • Risk assets have been resilient
  • Rally in fixed income has supported high yield currencies
  • Ever lower and more negative yields globally are driving the carry trade and supporting the AUD
  • Weekly Japanese buying of foreign bonds have accelerated and hit record levels recently

Negatives:

  • Weighing is our expectation of further easing from the RBA
  • Rising risks to domestic growth
  • The stimulus from the lower AUD to services trade appears to have peaked
  • Commodities are looking stretched

For today's decision I reckon the chance of a cut is much closer to 50/50 than is reflected in analyst views and market pricing. I am leaning towards a 'no cut' decision, but am mindful of how close it is going to be. And, an acknowledgement, my bias is nearly always to lean towards a 'no cut' decision when its close like this, so keep that in mind if you are noting my view.

For more ahead of the RBA today, check out David Scutt at Business Insider here:

  • Your 10-second guide to today's RBA rate decision

And more on the RBA here:

  • What's in store for AUDUSD as we head towards the RBA?
  • RBA to disappoint and AUDUSD will go above 0.80
  • Reserve Bank of Australia meeting tomorrow - here comes another cut!

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I'll be back, with a look at the implications of the RBA for the AUD, soon.