2019 growth slashed
At its quarterly Statement on Monetary Policy today the Reserve Bank of Australia slashed its GDP growth forecast for the year through June to 2.5% from 3.25% previously. For the year to June 2020 it cut its projection to 2.75% from 3.25% and sees 2021 growth at 2.75%. Unemployment is seen at 5.0% through 2019, unchanged from its current level. On inflation, it cut its headline CPI forecast to 1.25% and the core trimmed mean inflation to 1.75% from 2%.
Reiterating the tone from Governor Lowe’s speech on Wednesday, the statement said that the probability of a rate hike or cut are more evenly balanced than in the past, though the board does not see a strong case to move rates in the near term. However, they might lower rates if there was a sustained rise in unemployment or inflation got too low.
AUD/USD at 1-month lows
On balance, the Statement was viewed as dovish by the markets, with rates markets suggesting the chances of a rate cut by year-end are now just above 60%. AUD/USD fell accordingly, dropping to 0.7061, its lowest level since January 4. The 50% retracement of the January rally comes in at 0.7014.
AUD/USD Daily Chart
Nothing to see, move along
It’s an almost barren data slate for the rest of the day, with Canadian employment data the only item that could spark a move. Economists are predicting a gain of 8,000 jobs on top of December’s 9,300, though the unemployment rate is seen edging up to 5.7% despite an unchanged participation rate of 65.4%.
Prior to that, German trade and current account data for December are likely to pass without incident, with expectations of a narrowing of the trade surplus to EUR18.4 billion from EUR19.0 billion in November.
The full MarketPulse data calendar can be viewed at https://www.marketpulse.com/economic-events/