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Australian dollar hits five-month lows as market locks in two rate cuts

The Australian dollar reached five-month lows on Wednesday, as investors factored in two interest rate cuts this year, with a chance of a third in 2020.

It comes after Reserve Bank of Australia Governer, Phillip Lowe indicated that a cut is likely imminent on Tuesday.

Australian dollar price

The Australian dollar huddled near five-month lows, pinned at at $0.6883, just above its recent rough of $0.6865, at time of writing.

Markets have priced in an almost certain rate cut by the Reserve Bank of Australia (RBA), predicting a 1.5% cash rate decision when its board meets on June 4,.

RBA Governor Philip Lowe’s speech on Tuesday prompted all four of Australia's major banks to tip a June move. According to Reuters data, futures imply a 93% probability of a cut next month, and are fully priced for 1% by November.

Australian government bond futures reached historic peaks. The three-year bond contract dipped 1 tick to 98.815, while the 10-year contract lost 2.5 ticks to 98.3300.

New Zealand dollar price

The New Zealand dollar fell to its lowest in 7 months, dropping to $0.6500, affected by the markets betting on a cut in rates from the RBA.

This put pressure on the Reserve Bank of New Zealand to ease again. It comes after the New Zealand central bank cut rates to a fresh record low of 1.5% earlier in the month.

Meanwhile, New Zealand's benchmark S&P/NZX 50 index rose 0.1% or 10.78 points to 10,226.87.

Utilities provider Infratil rose 6.4% while dairy giant a2 Milk Co Ltd shares edged higher.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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