Talking Points:
- Aussie Dollar heads for biggest drop since June 2013 at -1.6%
- RBA cuts rates to 2.25% vs 2.50% prior
- RBA says further rate cut was appropriate to achieve balanced growth
The Australian Dollar declined over 1.6 percent versus the US Dollar after the Reserve Bank cut rates by 25 basis points. Economists were expecting the bank to keep rates unchanged at 2.50 percent. Today’s change in monetary policy marked the first time the bank adjusted rates since August 7 2013, or 15 consecutive meetings.
Despite improving economic data out of Australia relative to forecasts, the Bank’s decision to cut rates was seen as appropriate to achieve balanced growth. There was overall negative sentiment on domestic demand growth, output growth, and unemployment rates from RBA. The board also mentioned that the Australian Dollar was seen above most estimates of fundamental value. After the dovish statements made by the bank, market’s are pricing in an almost guaranteed 99% chance of a 25bps rate cut during the next rate decision.
