Forex Flash: RBA should now leave rate at 2.75% in 2013, current account deficit may shrink to -2.5% - TD Securities

FXstreet.com (Barcelona) - The RBA surprised the market with a 25bp rate cut to a record low 2.75% today, while consensus was toward an on hold decision. TD Securities analysts say that the communique suggests that the RBA is leaving the door open for further rate cuts, by stating that “...the Board has previously noted that the inflation outlook would afford scope to ease further...at today’s meeting the Board decided to use some of that scope”. “However, we note that the communiqué elsewhere was rather balanced, signalling no rush to follow up with another move. So despite the RBA remaining on an easing bias, we take today’s rate cut as our June cut delivered a month early”, wrote analyst Alvin Pontoh, leaving their cash rate profile for the remainder of the year flat at 2.75% at this point.

Australia also saw the publication of trade balance data, with a decent turnaround from a deficit of -$A111m to a surplus of +$A307m in March, while market consensus was flat: “A welcomed improvement after 14 consecutive monthly trade deficits”, Pontoh wrote. “While Q1 import volumes and prices are released at a later date, we estimate that the current account deficit could shrink from -3.9% of GDP in Q4 to closer to -2.5%”, he added, expecting net exports to add around ¾-1% to Q1 GDP, after +0.6%pt addition in Q4.