RBA Rate Cut Survey: 80% Expect Rate Cut While 20% Expect A Hold

(AU) Australian markets fell ahead of tomorrow’s RBA meeting. HSBC chief economist Paul Bloxham: Expects additional 25bps in policy easing from the RBA tomorrow, this is less than the 50bps he saw on May 1st. According to one of the more recent surveys on tomorrow’s RBA rate decision expectations, 50% of analysts expect a 25bp cut, 30% expect a 50bp cut, and 20% expect a hold.

(AU) S&P director of sovereign ratings Kyran Curry said if Australia delayed plan to return to budgetary surplus this would be inconsistent with its AAA sovereign rating.

(CN) China services PMI for May, which saw a 3-month low at 55.2, combined with the lower reading in the manufacturing PMI China is clearly headed for a slowdown. Analysts are increasingly expecting more aggressive policy response out of China after recent soft economic data. PBoC Gov Zhou said that European stimulus measures will have a limited and temporary impact; Yuan has the ability to become a widely accepted global currency

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How to interpret these headlines?

RBA is expected to cut interest rate during this meeting after seeing surprise contraction in Retail Sales last week, following the much weaker than expected quarterly CPI release. Although RBA Gov. Stevens recently stated that China’s economy has been slowing down due to slower pace of growth rather than outright contraction, it is still a sobering fact that a weaker Chinese economy is definitely going to affect Australia, as China is Australia’s largest trade partner.

Although Fitch did recently warn that RBA might not cut rates during this meeting, that sentiment has changed as majority of analysts (80%) expects some sort of cuts during today’s rate decision… And let’s just look at this from another perspective: If RBA does not cut rate today, is it more likely for them to cut or hike rates in the next 3 meetings? If your answer yes, they are more likely to cut rates in the upcoming meetings, then we are going to see traders sell on rally in the event of a hold… so act accordingly with your trades today.

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