Talking Points:
- Aussie Dollar slightly lower after data shows companies’ profits fell 2.8% in 4Q
- Timid Aussie follow-through may reflect traders waiting for the RBA rate decision
- Financial markets pricing in 5 percent probability of 25bps RBA interest rate cut
See how retail traders are positioned in the Australian Dollar with the DailyFX SSI.
AUD/USD edged slightly lower after Australian companies’ profits dropped by 2.8 percent (QoQ) in the fourth quarter versus expectations of a 1.8 percent decrease. Inventories unexpectedly contracted for the first time since the fourth quarter of 2014, dropping 0.4 percent. Economists were looking for a 0.1 percent increase ahead of the release.
Separately, January’s lending statistics also crossed the wires. Private sector credit grew 0.5 percent month-over-month while the year-on-year growth rate ticked down to 6.5 percent. Both outcomes matched consensus forecasts.
The Aussie’s timid reaction and lack of follow-through after the soft earnings print lacked may reflect traders’ unwillingness to commit to a directional bias ahead of the RBA monetary policy announcement due later this week. The markets price the probability of an interest rate cut at this meeting at 5 percent. On whole, the markets are pricing in 42 basis points of easing over the next 12 months according to overnight index swaps.
