Wanna Bet? The odds of a Reserve Bank rate cut

Tuesday 2 August 2016
Nic Crowther's picture
Co Editor
The Shaker

It looks like today is the day that the Reserve Bank will do the impossible and shave another 25 basis points of the cash rate.



Two years ago, 1.5% looked ridiculous. Now, the world has changed completely. The war in Syria has led to a refugee crisis that, almost in a heartbeat, moved Europe into a highly protectionist phase that has investors spooked.



That’s just the start of it. Similar sentiments in the United Kingdom led to last month’s Brexit, and the continual antics of America’s chief buffoon, Donald Trump has set the hares running on the other side of the pond.



Australia may seem a long way from these issues, but this is largely what is delivering an impact. Western markets see the Australian dollar as something of a safe-haven, and are investing buying up big on our South-Pacific Pesos.

The Reserve Bank is scared to let this activity the dollar push towards 80c - given the impact it will have on exports. Business confidence is picking up for the first time in years, and Governor Stevens will be looking to eliminate as many potential shocks as possible.



Sportsbet – the ever-reliable barometer of footy games and royal exotics - has priced in a rate cut at 1.67, while keeping the status quo sits at 2.10. Suffice to say, you wouldn’t put your heavily-mortgaged house on it, but it’s likely we’ll hear of the drop around 11.00am today.