Australia – interest rates cut in June even more likely

21.05.2019 09:32|Conotoxia Ltd Analyst Team

The Australian dollar did not last long on the higher levels that we observed on Monday due to the current prime minister`s power and guaranteeing the Liberal-National coalition of the majority in the lower house. Nevertheless, investors have been waiting for today`s statements by the head of the Bank of Australia with the hope of determining the future of monetary policy.

Philip Lowe has quite clearly defined his expectations regarding the next RBA decision, which will be taken as early as 4 June. What's more, a moment earlier we got to know the minutes from the last meeting of the Bank of Australia, which stated that a rate cut would probably be appropriate if there was no further improvement in the labour market. As we know, the unemployment rate has recently risen to 5.2 percent, which is the highest level for eight months. Meanwhile, Philip Lowe said he would consider lowering interest rates at the next month's meeting to increase the employment. In his opinion, recent data suggest that the labor market will not improve. Hence, the need to cut interest rates may start at the beginning of next month.

It seems, however, that the decision in June, if it takes place, will not be the only one in the near future. In the opinion of financial institutions, such as RBC (Royal Bank of Canada) or CBA (Commonwealth Bank), there is a chance for further easing of monetary policy. Then another cut in interest rates may take place already in August.

In response to the minutes of the May RBA meeting and the words of the head of the Bank of Australia, today the Australian dollar loses the most from the world's major currencies. The AUD/USD rate drops by around 0.5 percent.

Wykres AUD/USD

Chart: AUD/USD, W1. Conotoxia trading platform.

From the chart perspective, after breaking the lower limit in the triangle pattern, which is a formation of the continuation of the trend, the market may be heading to the textbook target which is located near 0.6774. In turn, the nearest resistance may be located at around 0.7040.

 

Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

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71.98% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71.98% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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