The RBA, meanwhile, is expected to leave its cash rate at a 12-year high of 4.35%, according to a Reuters poll of economists, and hold it there at least until end-September.
Inflation is coming down – it hit a two-year low of 4.1% late last year – but is still well above the central bank’s 2%-3% target range. The RBA was one of the last central banks to join the global tightening cycle, so could be one of the last to fully pivot.
Money market pricing is a little more dovish, in that traders have a quarter-point rate cut fully priced for August. On the other hand, only 45 basis points of cuts are expected by the end of this year, the least of all G10 central banks, with the exception of Japan’s, which is poised to raise rates.
The Australian dollar is at its lowest since mid-November, but could also be drawing some support from the RBA’s perceived ‘hawkish’ stance relative to other G10 central banks.
Having fallen around 1.3% in the last six months, it has held up better than sterling (-1.7%), the euro (-2.4%), Japanese yen (-4.5%) or the Swiss franc (-5%).
