This statement by the RBA will send shivers down the spines of those people expecting a further rate cut in the interim. The release of the RBA minutes has seen a sharp reverse of AUD/USD with the pair jumping 0.64% to $0.9166. The swaps market has reacted by adding 12 points, seeing the chance of a rate cut down to 51% in August and climbing.
The fact the RBA is comfortable with the current situation will mean the AUD should climb and the market will have to go it alone, putting additional pressure on the ASX.
From an equity market perspective the market has yet to completely digest the minutes. Most are concentrating on the upcoming production numbers from RIO. With cyclical stocks coming from a very low base, most are expecting a strong performance from these players. All eyes are on the likes of BHP, ILU, WPL, FMG and STO.
If the market is to punch through and hold onto the 5000 point handle, these stocks will have to lift as most defensives are fairly valued and are expected to report short margins come reporting season.