TWEET TALK: Dollar determinant

Expectations that the falling Australian dollar will stabilise the local economy have led to near consensus in the Twittersphere that the Reserve Bank will hold fire.

Ahead of the Reserve Bank of Australia’s decision on interest rates today at 1430 AEST, all but one of 13 economists surveyed by AAP expect the Reserve Bank to hold the cash rate steady. Most experts on Twitter agree that the central bank won’t move but predict its easing bias will remain.

Last month the Reserve maintained interest rates after cutting them to a record-low of 2.75 per cent in May. The board noted the significant fall in the Australian dollar may support the domestic economy but still remained high given the fall in Australia’s terms of trade.  

Market Economics managing director Stephen Koukoulas (@TheKouk) tweeted that interest rates will almost certainly remain unchanged as the falling Australian dollar stimulates the export sector and assists local firms competing against imports.

“The rate cut scenario will be debated. There's some chance they cut, but not likely today,” Koukoulas tweeted following his column on Business Spectator (Hold on, There’s no cut coming today, July 2).

In contrast Eureka Report investment strategist Adam Carr (@AdamCarrEcon) believes that there’s a “strong possibility” of a surprise from the Reserve today in response to the Australian dollar.

“The RBA is targeting the AUD and while it’s come off, they still think it’s too high.”

“Noting that, delaying might make it tough for them given solid jobs growth, CPI already mid band and global data strengthening.”

OptionsXpress market analyst Ben Le Brun (@benlebrun) joins most experts in connecting the weaker Australian dollar with an expected hold.

“On hold. The softer aud should do some heavy lifting for them. Best keep the powder dry for now...”

Finally, treasury dealer at the Arab Bank of Australia David Scutt (@David_Scutt) expects “no change” in the rate as easing bias remains.

“Easing bias to remain. Risk CPI tone will be more neutral given $AUD fall. Language towards China to be softer.”