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The money market appears to be fairly certain that the RBA will cut rates this week. Insofar as speculation of concerted action from central banks is building, the RBA’s policy decision is likely to be viewed by many investors as a taste of what could follow, analysts at Rabobank report.

Key quotes

“The Bloomberg survey suggests that forecasters are almost evenly split in the chances of a 25 bps rate cut from the RBA tomorrow.”

“Australian Q4 GDP, which is due to be released this week, is widely expected to confirm a sluggish economic backdrop with growth likely to be running at around 2.0% y/y saar. However, recent data have also suggested that last year’s RBA rate cuts have been instrumental in supporting property prices.”

“A move tomorrow will likely be taken by the markets as a sign that central banks are prepared to move early to head off a some of the economic impact of the crisis.” 

“We do not expect the pressure on the USD to extend. We see potential for AUD/USD to slip to 0.63 on a 12-month view.”