As per the national accounts released last week, the domestic economy grew by 3.2% on an annualised basis. With unemployment tracking at 5.7%, these figures taken together do not provide the RBA with any opportunity for rate cuts in the near term. However, the RBA has a dilemma as inflation numbers are low and the longer term forecasts suggest it will track low towards the bottom end of the RBA's target inflation range of between 2 and 3 per cent. We are therefore fairly confident that the RBA will not move further and leave the cash rate unchanged tomorrow. We still believe it is unlikely that the Central Bank will consider a further rate cut before its August meeting after receiving the ABS update on CPI for the June quarter.
AUD STRENGTHENS TO 74 us CENTS
The May US jobs report confirmed that the jobs growth was weak. Only 38000 jobs were created in May which is significant,y weaker than an average of 177,000 jobs that were created since January this year up until April. The market now has given up on a US rate rise. This has impacted the Australian Dollar and at the time of writing this update, the dollar was quoted at US 74 cents.
MARKET DATA
| Australia Cash rate Australia 90 day bank bill Australia 10 y bond US 10y Govt bond AUD/USD AUD/EUR AUD/JPY AUD/CNY ASX 200 S&P 500 Dow Jones Shanghai Composite Brent Oil (USD per BBL) Gold Spot (USD per oz) *Iron Ore 60% MBIOI-IR index USD/t (Updated Wednesday)" | As at 3-Jun 1.75 1.99 2.16 1.70 0.7246 0.6497 78.74 4.7710 5,318 2,099 17,807 2,938 49.64 1,245 43.61* | As at 27-May 1.75 1.97 2.25 1.85 0.7227 0.6458 79.31 4.74 5,406 2,099 17,873 2,821 49.32 1,212 47.45* |
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