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Rabobank analysts suggest that the RBA’s February policy statement was deemed to be little more hawkish than expected due to the rise in market speculation regarding rate cut risks.

Key Quotes

“The following day the value of the AUD plunged almost 1% vs. the USD as Governor Lowe set the record straight.   He commented that “looking forward, there are scenarios where the next move in the cash rate is up and other scenarios where it is down”.”

“He indicated that when it came to the likelihood of a rate cut vs. a rate hike this year that “today, the probabilities appear to be more evenly balanced.”   Consistent with the balanced outlook, this morning’s RBA policy statement appears to offer little direction one way or the other.   However, Lowe is scheduled to speak again tomorrow and the market will be listening intently for any fresh policy clues.”

“It remains our view that the next RBA policy move will be a rate cut and we see downside risk to AUD/USD over the medium-term.”