The Reserve Bank of Australia (RBA) ended its September policy meeting by keeping rates at 1% as expected, when investors had seen a small chance of a cut. Still, the bank reiterated that it would ease again if needed and that rates would stay low for a long time to come. Futures imply a 70% chance of a cut to 0.75% in October, and are fully priced by November. A further move to 0.5% is seen by March at the latest.
The need for stimulus was underlined by figures showing retail sales fell 0.1% in July, when analysts had looked for a rise of 0.3%. Bond markets were quiet with yields holding near historic lows. Australian three-year bond futures edged up 1 tick to 99.320, with 10-year contract flat at 99.0750. Part of the decline was due to strength in the US dollar which was benefiting broadly from safe-haven flows out of the euro and sterling.
The Chinese yuan also touched an all-time low on the US currency in offshore trade after Bloomberg News reported that Chinese and US officials are struggling to agree a schedule for a round of trade negotiations that had been expected this month.