The Reserve Bank of Australia (RBA)’s May 5th meeting may garner extra attention next week, with markets continually positioning for rate cuts. At the April 7th meeting, futures had priced in a 75% chance of a cut, and yet the RBA surprised by holding the cash target rate at 2.25%, saying they wanted to wait to assess more data. There have been two major pieces of data released since then, both of which were slightly hawkish. Q1 CPI came in as expected (headline higher by +0.2% q/q with core rising by +0.6% q/q), but the market reaction that day implied markets had been positioned for a downside miss. The March jobs report was a gangbusters surprise, with major upward revisions also applied to February. Expectations of a cut have softened somewhat since the last meeting but are still very strong: futures are now looking at a 62% chance of a cut and only 3 out of 28 economists polled by Bloomberg expect the RBA to hold. Scotiabank Economics also expects a cut at the next meeting, though the strong market positioning probably means the bulk of the market move is already priced in. There’s a slew of data released around the RBA policy statement, but it’s likely to be drowned out in part by the RBA’s action (or inaction). Trade figures will come out just three hours before the RBA, and both new home sales and retail sales will follow on Tuesday evening. Wednesday’s April jobs report might miss the May meeting, but it will certainly figure into their June 2nd discussions.
The material has been provided by InstaForex Company – www.instaforex.com