RBA meeting preview – could contribute to the AUD/USD falling to 0.7200

This is a preview of the Reserve Bank of Australia meeting coming up (July 3, 2018) with thoughts on the impact on the Australian dollar  

It is via Capital Economics. 

Like everyone else they are expecting the Reserve Bank will leave interest rates at 1.5% at the policy meeting. 

Of course, but CE go on (I pulled out just a few snippets):

  • An apparent wilting desire to raise interest rates
  • probably won’t raise rates until late in 2019. If anything, the chances have increased that rates won’t be raised until 2020. 
  • That could contribute to a further weakening of the Australian dollar from US$0.74 now to US$0.72, or below, by the end of this year.

(bolding is not me, CE emphasis)


two developments explain why in recent weeks the RBA has sounded more dovish

  • First, the escalation of the US-China trade dispute has cast a darkening cloud over the long-term outlook for Australia. In the near-term, this could actually boost the Australian economy if it meant the Australian dollar continued to weaken and if China stimulated its own economy. 
  • Second, the RBA appears to be placing a bit more emphasis on the potential influence on the economy from the Royal Commission investigation into the banks. In the statement published after June’s interest rate decision the RBA noted that “there may be some further tightening of lending standards”. That could result in banks rejecting some loan applicants and providing smaller loans to others. Admittedly, the RBA does not believe that a major credit crunch is around the corner….  But overall lending conditions are still a little bit tighter now than the RBA expected
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