Just a quick note on the RBA decision overnight. The market got a bit ahead of itself in pricing in an 80% probability of a cut in April, while the majority of local analysts stuck with their call for a May cut. I was in the May camp too (see here) given the paucity of data since the last decision and the opportunity to update the forecast in the next SoMP.
The statement retained a clear easing bias, so all is to play for in May:
Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The Board will continue to assess the case for such action at forthcoming meetings.
As in March, the AUD popped on the no change decision, but remains in the 76c range. Given the fall in iron ore prices in recent weeks, the case for 70c being the new “fair value” gets ever stronger. A rate cut in May will help move things in that direction.
Fundamental Macro 