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May 2016

RBA cuts cash rate

Published: Tuesday 17 May 2016

  • RBA cuts cash rate 
  • UK and US CPI figures awaits 
  • Leave Camp ahead in Brexit polls
Overnight the minutes from the Reserve Bank of Australia’s May 3rd meeting revealed some reluctance by members to cut the cash rate.  Although surprised by the weak first-quarter inflation data released the week prior, the central bank said in the minutes that members had "discussed the merits of adjusting policy (this month) or awaiting further information before acting".  In the end, they cut it to a new low of 1.75 per cent which saw the Australian Dollar move up through 1.90 in early May to where it sits now at 1.9750.
The upcoming Brexit vote continues to dominate headlines this morning – over the weekend polls were spit with the Remain camp slightly in the lead in a phone poll whilst an online poll shows the opposite results. Today Sir Lynton Crosby, the strategist behind the Conservative election victory, warned that the Leave camp must focus more on voters and less on infighting.  Statistics from a recent survey also suggested that UK universities could find it harder to recruit international students if the UK leaves the EU, as 47% said UK universities would be less attractive in the event of Brexit.
Looking toward data released this morning, UK CPI figures headline the economic calendar in European trading hours. The headline year on year inflation rate is expected to remain unchanged at 0.5 percent in April while the core figure,  a measure of the underlying price growth trend that excludes volatile components like food and energy ticks lower from 1.5 to 1.4 percent. Anything unexpected could see some volatility on the back of this.  This afternoon we’ll have US building permits, housing starts and consumer price inflation figures also from the States.  The Pound bounced nicely against the Dollar and the Euro overnight, with GBPUSD hitting 1.45 briefly this morning after finding buyers at 1.4360 yesterday – the inflation numbers this afternoon could trigger more volatility as recent data released has been well wide of market forecasts - this afternoon could be a similar story.

Today's Major Economic Releases 

Market BST Data/Event Previous Expected
GBP 09:30 UK: CPI y/y 0.5 0.5
GBP 09:30 UK: RPI y/y 1.6 1.6
EUR 10:00 EU: Trade balance 20.2 23.1
CAD 13:30 Canada: Manufacturing sales m/m -3.3 -0.7
USD 13:30 US: Building permits 1.09 1.13
USD 13:30 US: Core CPI m/m 0.1 0.2
NZD 23:45 New Zealand: PPI input q/q -1.2 0.3

Daily Currency Insight by Alastair Sweetman

Daily Currency Analysis with Zeta Webber

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