RBA is widely expected to keep the cash rate unchanged at 1.50% tomorrow. Economists have been pushing back their expectation on the timing of an RBA hike after recent sluggish wage growth and inflation data. Late last year, there were speculations that RBA could hike twice by the end of this year. And now, markets are only pricing in around 40% chance of one hike in 2018. The majority expects that tightening won’t start until 2019.
While the job markets have been strong in Australia, wage growth remained sluggish. Unemployment rate has now stabilized at 5.5-5.6% after last year’s growth. However,the figure is floored by continue rise in participation rate. In that sense, the unemployment rate would stays away from hitting 5% level for a while, the level considered to be at full employment. That is, slack will remain in the economy.
RBA rate speculations, falling iron ore price and worries regarding US-China trade war left Aussie as one of the weakest back in March, in particular against Euro and Sterling. AUD will likely stay pressured after tomorrow’s RBA rate statement.