The results of the Australian election are still being tallied with 1.5 million postal and absentee votes yet unaccounted for. Vote counting is expected to drag on for days, possibly weeks but in the meantime, investors await more important news this afternoon when the central bank is scheduled to announce whether it will cut interest rates.
At 2.30pm AEST, the Reserve Bank of Australia will release its rates decision and accompanying July monetary policy statement and while almost everyone believes that the cash rate will be left at 1.75%, markets will be paying close attention to the wording of the accompanying monetary policy statement, especially the final paragraph.
The key question regarding its monetary policy is whether the bank will choose to make more 'forward-looking' comments and/or signal a clearer easing bias. Today’s statement will likely just acknowledge the 'Brexit' event and accompanying uncertainties but continue to give little or no near term policy guidance.
It might, however, present a clearer 'framework' for future decisions--perhaps an indication in the closing paragraphs that it would be monitoring the 'Brexit' shock and the inflation outlook - but it will most probably not give any clear signal of an intention to cut.
Economists Certain No Cut Today
According to Business Insider, all 25 of the economists recently interviewed by Bloomberg expect that the RBA will leave the cash rate on hold when it meets today. However, 24 of those interviewed said they expect the RBA will cut interest rates when they meet again on August 2nd, acknowledging the fact that the RBA will be able to base its decision on freshly available data on inflation at that time.
The postponement of an interest cut today could send the Australian dollar lower and potentially provide the market with an injection of confidence.