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RBA Governor signals reluctance to ease further

Emily Nicol
Chris Scicluna
  • RBA Governor Lowe today flagged worries that additional cuts might exacerbate the current strong upswing in Aussie house prices, adding to expectations that the bank is now on hold for a lengthy period. Meanwhile, after the Japanese final services PMI reported a sizeable downwards revision, focus turns to the equivalent European releases, US non-manufacturing ISM and ADP report.  

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RBA appears in no hurry to ease

Emily Nicol
Chris Scicluna
  • As had been widely expected, the RBA kept the cash rate left unchanged at a record low of 0.75%. But while Governor Lowe’s policy statement maintained an easing bias, he also suggested that the RBA is in no hurry to adjust policy.

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Chinese markets in catch up mode

Emily Nicol
Chris Scicluna
  • China’s markets reopened from the Lunar New Year holiday and were inevitably in catch up mode as the number of reported cases of coronavirus continued to rise at a double-digit percentage daily rate. And even though heightening concerns about the associated economic impact is not yet fully reflected in surveys, Japan’s manufacturing PMI reported a downwards revision in January’s final release.  

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Japanese output making modest recovery

Emily Nicol
Chris Scicluna
  • A deluge of Japanese data overnight suggested that the recovery in the manufacturing and retailing sectors in December was inevitably not sufficient to offset the post-tax hike and natural disaster-associated plunge in activity seen earlier in the quarter. Inflation fell short of expectations at the end of 2019 too.

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Bank Rate to be cut (sooner or later)

Emily Nicol
Chris Scicluna
  • Given the upside surprise to January’s PMIs, today’s BoE rate decision looks too close to call. But if the MPC doesn’t move today, we fully expect Bank Rate to be cut before the summer. Elsewhere, risk aversion dominated Asian markets ahead of another meeting today of the WHO’s Emergency Committee on the coronavirus.

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