RBA Rate Decision Today

US stocks rallied overnight which brought the S&P 500 to a new six month high following an 0.35% rally. The Nasdaq 100 climbed 0.6% with Facebook (FB) stock rallying 4.4%. While FB has yet to recover its losses that came following its disappointing earnings release in late July, it is now US$15 above those lows. ASX 200 futures are up 3 points this morning.  

Today the Reserve Bank of Australia makes its interest rate decision for the month. No change in rates is expected as the economy isn’t thought to be strong enough to handle a rate increase. The decline in house prices, particularly in the eastern states, over the past year, gives the RBA yet another reason to keep rates on hold in addition to the high levels of household indebtedness and relatively benign inflation. For these reasons, traders don’t expect a rate rise over at least the next year.

US long term bond yields have pulled back over the last week with the 10-year yield retreating below the key 3% level, currently at 2.94%. Three percent is seen as a key psychological level as the yield has so far failed to hold above this level for any extended period of time over the past five years.

Weakness in the gold price continues as traders expect at least one more rate hike for this year. Gold fell by 0.5% last night to US$1,208 per ounce, a one year low. According to market pricing, there is a 94% chance of a 25-basis point rate hike at the Federal Reserve’s next meeting on 26 September. 

Data Releases:

-    Australia RBA Rate Decision 2:30pm AEST

This article was written by William O'Loughlin - Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.

Complex product warning

This article contains information about foreign exchange contracts, which are considered complex financial products. Please click here to read ASIC's foreign exchange trading article before considering an investment in foreign exchange contracts. 

This article contains information about CFDs, which are considered complex financial products. Please click here to read ASIC's "Thinking of trading contracts for difference?" document before considering an investment in CFDs.
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