RBA Cuts Rates & Downgrades Growth Forecast
AUD
The Aussie Dollar opens the day mixed, with RBA cutting interest rates yesterday to 3.60%, as markets expected, not having a major impact on currencies. Commodities were mixed, with Oil down 1.3%, Nat Gas down 2.2%, Gold down 0.1%, Silver down 0.2%, with Iron up 0.2% and copper gaining 1.7%. Asian equities finished the day in the green, with the ASX up 0.4%, and Shanghai Comp up 0.5%. At 2:30pm yesterday, the RBA announced it’s rate decision, seeing the widely expected 25 bps cut to 3.6%. This rate is the lowest since April 2023, amid a downgrade to the RBA’s forecast of annual economic growth forecast to 1.7% from 2.1% following a weaker-than-expected first quarter. RBA Governor Bullock said the central bank's forecast suggest interest rates might need to be lowered further to keep prices stable. Markets are now expecting another 25bps at their next meeting in September. Today at 11:30am will see the Wage Price Index q/q set to be released, expected at 0.8%, following the previous quarter's 0.9%.
USD
The AUD/USD sees a boost overnight with the USD weakening on increased expectations of an imminent interest rate cut from the Federal Reserve, seeing the pair drop below the 0.65, jumping to touch the 0.6540 handle, opening at 0.6528. US CPI data was released last night, with the Core CPI m/m increasing 0.3% m/m as expected (prev. 0.2%) and the y/y figure was unchanged at 2.7%. The lift was driven by services prices, indicating the impact of tariffs on goods prices is transitory, and paving the way for the Fed to cut rates in September. Wall Street was bullish of the back of this, seeing DOW JONES and S&P 500 up 1.1%, and the NASDAQ was up 1.4%. Tonight will be quiet, with FOMC Members Goolsbee and Bostic speaking tonight, which may give some insight into these new inflation readings.
EUR
The AUD/EUR softens yesterday, with the pair losing most of it’s gains overnight, opening this morning at 0.5591. European equities were mixed into the close, with the DAX down 0.2%, and the CAC up 0.7%. Yesterday saw the German ZEW Economic Sentiment read 34.7, starkly down from the 52.7 seen last month. Economists believe this is from the “disappointing” EU-US trade deal that was announced. Tonight will see the German Final CPI m/m, expected to remain unchanged at 0.3%, and WPI m/m also expected to remain unchanged, at 0.2%.
GBP
The AUD/GBP drops lower overnight, seeing the pair hit a monthly low, opening this morning at a rate of 0.4835. British equities were soft into the close, with the FTSE finishing up 0.2%. UK employment data was released yesterday, with Average Earnings Index 3m/y reading 4.6%, down from 5%. Claimant count change also had a big miss at -6.2k, expected to come in at 19.7k from -15.5k. The Unemployment Rate remained at 4.7%, in line with expectations. This data combined with the Bank of England's recent interest rate cut to 4% may be sufficient to balance growth and inflation, potentially putting further cuts on hold until 2026.
NZD
The AUD/NZD opens the day flat, with pair giving up the mild gains it saw in the afternoon, opening this morning at 1.0963. There was no data released yesterday and there will be nothing until Friday. External events will be the key factor to affecting the rate.