This week, Australian GDP surprised on the downside in 1Q13, recording a second consecutive quarter of GNE contraction, despite being aided by favorable weather patterns, government stimulus, near-term proximity to interest rate cuts, and solid wealth gains.
"With consumer sentiment declining, falling back to August 2012 levels, and signs that labor market conditions have deteriorated further, it is likely that the RBA will be disappointed with the tone of the economic data. It is likely that GDP growth will be closer to 2.25% yoy in June (compared to the recent 2.5% yoy forecast by the RBA) and the risks of a sooner and sharper decline in mining investment continues to threaten the economic outlook into 2014," projects Goldman Sachs.
"As such we expect the RBA will find that the combination of soft activity data and low inflation pressures will provide it with scope to ease further in the near term. As such we now expect the RBA to cut interest rates by 25 bps in July and cut interest rates by a further 25 bps in November taking the cash rate to 2.25% (previously we forecast the RBA would cut by 25 bps in November)," GS adds.
These coming rate cuts, according to GS, confirmed its bearish AUD view which sees AUD declining further towards 0.90 over the coming months.
Read More: http://www.efxnews.com/story/19135/heading-weaker-aud-rba-set-cut-rates-july-then-nov-goldman-sachs
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