(24 APRIL 2019)DAILY MARKET BRIEF 2:Australian shares in spree as rate cut expected in May
It’s a bullish start of the week for Australian equities and a good kickoff on public holidays. The Reserve Bank of Australia (RBA) policy minutes have already had an effect, but the recent quarterly inflation data releases is a confirmation that the RBA next step will be a rate cut. The cash rate of 1.50% is already at historical low and largely below neutral level. Both q/q and y/y headline CPI came largely below expectations, pointing at 0% (0.20%) and 1.30% (1.50%), lowest since 2016.
The reaction on the markets was not long in coming. The muted inflation figure combined with a slight rise in unemployment figure had investors selling the Aussie and becoming the major G10 currency loser of the day while Australian S&P ASX 200 gained as much as 1%, closing at 6382.14, its highest range since December 2007 with exporting companies benefitting the most. A profit-taking session is therefore very likely.
In light of the recent events, we expect AUD weakness to accelerate ahead of 7 May 2019 monetary policy meeting while elections following right after should have a different impact. Currently trading at 0.7044, AUD/USD is heading along 0.7030 short-term.
