RBA Decision Today

The Dow Jones made a 152 point gain overnight (0.68%) bringing it to a fresh record high. The impetus for this rally appears to be a continuation of optimism around president Trump's new tax plan which would see a significantly reduced company tax rate as well as adjustments made to the personal income tax. The ASX also had a strong session yesterday despite NSW having a public holiday. The ASX 200 climbed 0.85% which puts it firmly back into the middle of its four-month trading range.  

Today the Reserve Bank of Australia (RBA) board meets to decide interest rates for the month. Rates are widely expected to be left unchanged at 1.5% although signs are that we are moving closer to an interest rate hike. The statement accompanying the decision will hopefully shed some light on when the RBA intends to raise rates but they could also refrain from signalling any future changes for now. Later in the week we get retail sales and trade balance data that will factor into next month's RBA interest rate decision. Although last month's retail sales number was disappointing, we have had a string of mostly positive data over the last seven months and Thursday's data is expected to show a 0.3% gain for the month of August.

President Trump will be deciding who will be the next Fed Chair in the next few weeks with four candidates currently seen as front runners. Yellen's tenure could potentially be renewed but currently Kevin Warsh is the favourite. Warsh is expected to be more hawkish than Yellen which could mean a faster pace of interest rate hikes if he is ultimately chosen as Yellen's successor.   

WTI oil prices lost 2.2% overnight as market fears returned that US shale output will continue to increase and OPEC will have difficulty sticking to its agreed production cuts. Oil nevertheless held the $50 per barrel level, currently trading at $50.58.      

Data Releases:

–    Australia Building Approvals 10:30am AEDT

–    Australia Cash Rate Decision 2:30pm AEDT

To view the Rivkin economic calendar and Local Markets matrix, members can click here.

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.