Australian dollar down
The Australian dollar continues to slide Wednesday, buying 70.13 US cents from 70.35 US cents on Tuesday.
Yesterday, the local currency rallied after the central bank defied pressure for an immediate cut in interest rates, though it left the door wide open for an easing should the jobs market not stay strong.
The Aussie dollar popped up almost half a cent to 70.42 US cents on the decision, giving it a gain for the day of 0.7 per cent.
The Reserve Bank of Australia ended its monthly policy meeting by keeping rates unchanged at 1.5 per cent, where they have been since mid-2016.
There had been much speculation it would ease given recent weak inflation outcomes.
Yet the central bank set the conditions for an easing by noting that inflation was too low and unemployment would have to fall further to get it rising.
Investors reacted by lengthening the odds on a cut in the next couple of months, though it was fully priced for September.
Interbank futures had implied a 36 per cent chance of a quarter-point cut this week, while 17 of 42 analysts polled by Reuters have tipped an easing with the rest on hold.
The July futures contract now implies a 52 per cent probability of an easing, compared to 100 per cent before the meeting.
August shows a 90 per cent chance of a cut.
Australian government bond futures surrendered some of their recent gains, with the three-year contract off 8.5 ticks at 98.685.
The 10-year contract fell 5 ticks to 98.2000.
Yields on three-year bonds rose to 1.31 per cent, having touched an all-time low of 1.23 per cent on Monday.
If the RBA does eventually cut, markets will automatically assume it will go again, as the bank has never moved rates just once and stopped.
It eased twice in 2016 and twice in 2015.
The case for more stimulus was underlined by data showing retail sales were surprisingly soft in the March quarter, falling 0.1 per cent when adjusted for inflation.
That posed a downside risk to economic growth in the quarter and offset another strong reading on international trade.
Australia’s trade surplus for March beat expectations at $4.9 billion and set the seal on a record-breaking total of $14.7 billion for the quarter.
The flood of cash might almost be enough to give the country a current account surplus, the first in modern history.
The Aussie had taken a hit on Monday after US President Donald Trump’s threats of more tariffs on China threatened to derail chances of a trade deal anytime soon and sent stock markets sliding.