Daily Flows & Insights – Crucial Week Ahead of RBA

Daily Flows

  • With the financial year drawing to a close, banks will be looking to square up their positions and will be chasing some last minute funding to meet their requirements. This will result in some off market specials for investors.
  • Market participants will have to act quickly in order to take advantage of any bespoke offerings.
  • 1 year TD’s has been the term of choice lately, however we are also starting to see some market participants lock in longer dated TD’s, all the way out to 5 years with some ADI’s showing rates up to 5.65%

Crucial Week Ahead of RBA

  • After the surprise hike last month, the market is hanging on every data released ahead of the July meeting.
  • Starting the week there is only a 25% chance priced in ahead of next week’s meeting which is more than what was priced ahead of the surprise hike in June.
  • One data point, which was highlighted last month as one that swayed the decision, is the monthly CPI release and it is out on Wednesday.
  • The monthly CPI jumped sharply when it was last updated thanks to the base effect from a year ago.
  • Currently the market is expecting the annual rate to fall from 6.8% in April to 6.1% in May.
  • There are some forecasters expecting it to drop in to the high 5% region and potential be in the high 4% area by the July print.
  • Any weakness should give the RBA time to wait and see before the quarterly release which is due in late July before the August RBA meeting.
  • In addition to the CPI release we will get the latest retail sales data.
  • Anecdotally there is plenty of signs that consumption is coming under increasing pressure so this release will be closely watched on Thursday.
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Curve Team
David Flanagan