All quiet ahead of the RBA

Local investors are looking at a muted trading morning ahead of trade data and this afternoon’s announcement from the Reserve Bank of Australia. Weaker oil prices will weigh. The direction of the banks will determine today’s performance although the morning session will likely continue the light trading that began the week.

Energy markets are under pressure again, and oil and gas stocks are likely to suffer further after yesterday’s 3 % sell off. A fall in consumer confidence released this morning could hurt retailers, and falls in US markets overnight on weaker industrial data could add to pessimism. More supportive is the fact that the Australia 200 index is at both technical and dividend yield (5% plus franking) support levels.

Trade data this morning is forecast to show a deficit of $2.5 billion for February. However, there are risks that the much stronger than expected read on manufacturing yesterday may see a result well away from market thinking.

There is no expectation of a change in interest rates when the RBA board concludes its meeting today. Rather, markets are focussed on the potential for commentary on the level of the AUD. So far this week the AUD has slipped below 76 US cents and 85 Japanese yen, and the board may attempt to accelerate the downward momentum with talk about declining energy prices and the desirability of a lower AUD in the transition of the Australian economy.