Implications of no rate cute... The stubbornly high dollar has probably been the biggest thorn in the side of the RBA over the past few years. The dramatic movements in the currency last week highlight just how sensitive the dollar is to rate movements. I think this quote from Charlie Aitken sums up the current situation extremely well (source SMH). The Australian financial markets are fully discounting the rate cut and in my view it is 100% priced in. The risk the RBA board faces is NOT delivering on the markets expectations... The Australian dollar is 77.69usc because the world expects the RBA to cut rates by 50bp in the 1H of 2015. The RBA needs to deliver on the financial markets expectations or be prepared to watch the AUD move quickly back above 80usc. Whilst I still think there is a chance rates don't move it would seem odd that the RBA finds itself in such a position, with respect to the currency, where the outcome of their meeting could drive the dollar sharply higher. (VIEW LINK)


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Jordan Eliseo

couldn't agree more with Charlie there. if the RBA don't cut they're going to have to most dovish of language. All the risk is to the upside (unless they cut 50bps of course), which they won't

James Marlay

For what it is worth I am expecting no cut but but as you say Jordan the language will leave the door open for a cut in March. I think the RBA will want to give lower currency and lower petrol prices sometime to work through the economy. Reporting season outlook commentary (in Feb) could well provide some insights.