The relief in AUD following the surprising reelection of PM Scottt Morrison conservative coalition for another four years was short-lived, as convictions of investors that the Reserve Bank of Australia will be cutting its Cash rate by 0.25 percentage points during its 4 June 2019 meeting is growing. The RBA policy minutes from May meeting confirmed worries over growth, the labor market and a slowdown in household consumption. Further pressure can be expected on the Aussie.
Indeed, the news is not good for both the RBA and the newly elected government as Australian treasurer Josh Frydenberg confirmed that time is running out to implement the Liberal Nation coalition election promise of a tax legislation, which is supposed to provide a tax relief for 10 million of low- and middle-income class households for 2019/20 financial years. Whether this would be implemented in 2019 and 2020 doesn’t change much for the RBA anyway, since it is highly likely that it will reduce its record low key rate to 1.25%. Furthermore, in the event of a non-applicable tax rebate for this year, we should see rising criticism against the majority government.
AUD/USD is currently trading at 0.6873, a 16-years low (-2.50% year-to-date) and approaching 0.6865 short-term.
