SYDNEY: Australia's central bank is considered almost certain to keep its cash rate steady next week, while a batch of economic data will be picked apart for evidence that record-low rates are providing enough stimulus to offset an imminent peak in the mining investment boom.
The Reserve Bank of Australia (RBA) is seen leaving its cash rate at 2.75 percent at its June 4 meeting, having just a month ago delivered a quarter-point cut that caught many analysts by surprise. This time, there is a clear consensus among many economists that the RBA will stand pat as they suspect a recent slide in the local dollar would boost the economy.
The Australian dollar has fallen around 5 percent this month on a trade weighted basis and nearly 10 percent against the U.S. dollar to a 19-month trough of $0.9528. "For this reason, we expect the RBA to remain on hold next week.
The depreciation of the AUD has added further monetary stimulus, which would be welcome," said Paul Bloxham, HSBC's chief economist for Australia & New Zealand. According to a Reuters poll, only two out of 22 economists expected a cut in June.
See for the survey. Recent data has also eased fears that capital spending by Australian firms would fall off a cliff once the long boom in mining investment finally crests, further reducing the urgency for the RBA to act.
Still, many believe the central bank will keep the door open to more easing thanks to benign inflation and as new drivers of economic growth appear to remain elusive, a factor that markets will be studying in next week's flood of upcoming data.
Investors will be paying close attention to retail sales for April on Monday and first-quarter gross domestic product ( GDP) on Wednesday.
Analysts polled by Reuters expect retail sales to have increased 0.3 percent in April, bouncing back from an unexpected fall in the previous month and resuming an improving trend as consumers respond to lower interest rates.
Solid consumer spending as well as an increase in exports were seen underpinning first-quarter growth.
The overall economy is expected to grow at a respectable 0.8 percent clip on the quarter, but that will not be enough to see the annual pace slow further to 2.7 percent from 3.1 percent. Such an outcome would also be the weakest since the December quarter of 2011 and below the long-run average of roughly 3.25 percent.
A sharp slowdown in resource investments, still subdued non-mine spending, and weaker public demand have been a drag on the economy.
Any unexpected weakness in the numbers will strengthen market conviction of further rate cuts this year. The market is giving a less than one-in-five chance of a follow-up cut in June, but is fully priced for a quarter-point cut over the year .
While local data will garner plenty of attention, market tone early in the week will be set by a survey of manufacturing activity in China, Australia's single biggest export market, that is due out on Saturday.
indiatimes.com
The Reserve Bank of Australia (RBA) is seen leaving its cash rate at 2.75 percent at its June 4 meeting, having just a month ago delivered a quarter-point cut that caught many analysts by surprise. This time, there is a clear consensus among many economists that the RBA will stand pat as they suspect a recent slide in the local dollar would boost the economy.
The Australian dollar has fallen around 5 percent this month on a trade weighted basis and nearly 10 percent against the U.S. dollar to a 19-month trough of $0.9528. "For this reason, we expect the RBA to remain on hold next week.
The depreciation of the AUD has added further monetary stimulus, which would be welcome," said Paul Bloxham, HSBC's chief economist for Australia & New Zealand. According to a Reuters poll, only two out of 22 economists expected a cut in June.
See for the survey. Recent data has also eased fears that capital spending by Australian firms would fall off a cliff once the long boom in mining investment finally crests, further reducing the urgency for the RBA to act.
Still, many believe the central bank will keep the door open to more easing thanks to benign inflation and as new drivers of economic growth appear to remain elusive, a factor that markets will be studying in next week's flood of upcoming data.
Investors will be paying close attention to retail sales for April on Monday and first-quarter gross domestic product ( GDP) on Wednesday.
Analysts polled by Reuters expect retail sales to have increased 0.3 percent in April, bouncing back from an unexpected fall in the previous month and resuming an improving trend as consumers respond to lower interest rates.
Solid consumer spending as well as an increase in exports were seen underpinning first-quarter growth.
The overall economy is expected to grow at a respectable 0.8 percent clip on the quarter, but that will not be enough to see the annual pace slow further to 2.7 percent from 3.1 percent. Such an outcome would also be the weakest since the December quarter of 2011 and below the long-run average of roughly 3.25 percent.
A sharp slowdown in resource investments, still subdued non-mine spending, and weaker public demand have been a drag on the economy.
Any unexpected weakness in the numbers will strengthen market conviction of further rate cuts this year. The market is giving a less than one-in-five chance of a follow-up cut in June, but is fully priced for a quarter-point cut over the year .
While local data will garner plenty of attention, market tone early in the week will be set by a survey of manufacturing activity in China, Australia's single biggest export market, that is due out on Saturday.
indiatimes.com
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