RBA’s ‘glass half-full’ minutes suggest market is underpricing further rate cuts - BNPP

Research Team at BNP Paribas, suggests that an upbeat tone to the Reserve Bank of Australia’s minutes of the June meeting means that the AUD has remained supported overnight.

Key Quotes

“The headlines from the minutes suggested that the RBA is not in a rush to deliver further easing, commenting that June’s pause was ‘consistent with CPI returning to target’ and that the domestic economic data is generally positive.

Our economist, however, views that downward pressure is likely to persist given that trend growth is below potential. As such, we view that the rates markets are under-pricing the scope for further RBA easing. The rates market is pricing only a 49% probability of a move by August (when our economists expect another policy rate cut), down from 60% probability prior to the meeting.

Meanwhile, the BoJ’s minutes overnight did not provide any signals for the market. This was broadly expected as these minutes were for the April meeting rather than the more recent June meeting.”