The Australian dollar fell more than a cent or 1.6% to 66 USc overnight after the RBA paused its cash rate for a second month in a row, surprising markets and most economists, but not ANZ’s.
In our deep dive interview, we talk with ANZ’s Group Chief Economist Richard Yetsenga about why an Australian recession is now unlikely.
The 5 things you need to know
The Reserve Bank of Australia held the cash rate at 4.1% yesterday. Markets had priced in a 1/3 chance of a 25 basis point hike and a majority of economists also forecast a hike. ANZ’s economists saw a pause, and now see the RBA on hold until late next year.
The Australian dollar fell 1.6% after the decision and two-year Government bond yields fell 12 basis points to 3.81%. That may be offset by a rise in US Treasury yields overnight after news of more US Government borrowing.
Australian consumer confidence improved last week, which ANZ Senior Economist Adelaide Timbrell says reflects lower inflation and the RBA’s pause.
In data out overnight, the ISM survey of US manufacturers in July showed a ninth month of contraction, in line with hopes for a soft landing.
New Zealand jobs and wages data later this morning is expected to show a slight easing, but still with plenty of inflation pressure for the Reserve Bank of New Zealand to watch. New Zealand’s cash rate is also on hold.
Cheers
Bernard
