TOP 5 EVENTS TALKING POINTS:
- The Reserve Bank of Australia's Tuesday meeting will very likely see a 25-bps rate cut, but that is widely expected by markets, with overnight index swaps pricing in a 93% chance of a cut coming into this week.
- The June European Central Bank meeting on Thursday should see more details about the TLTRO program come to light alongside a cut in both the growth and inflation forecasts.
- May US jobs data on Friday should show ongoing strength in the US labor market.
Join me on Mondays at 7:30 EDT/11:30 GMT[1] for the FX Week Ahead webinar[2], where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.
06/04 TUESDAY | 04:30 GMT | AUD RESERVE BANK OF AUSTRALIA RATE DECISION
In the interim period since the last RBA meeting in May, rates markets have continued to pull forward expectations of a 25-bps rate cut into the first half of 2019. After the May RBA meeting, there was a 59% chance of a 25-bps rate cut in June; currently, those odds sit at 93%.
Given that market pricing is very tight as is –there is a 70% chance of a second 25-bps rate cut by September (overall, a 79% chance of two cuts in 2019) – it will take a lot for the RBA to not disappoint steep dovish expectations. When a policy decision is priced-in this far in advance, it shouldn’t be a surprise if the corresponding currency (in this case, the Australian Dollar) doesn’t respond
