The Australian dollar declined today after the Reserve Bank of Australia downgraded its growth and inflation forecasts and reiterated that chances for an interest rate hike and a cut are "balanced" now.
"The outlook for household consumption growth continues to be one of the key sources of uncertainty for the domestic growth forecasts, particularly given uncertainties around the outlook for income growth and how developments in housing markets will affect household decision-making".
Australia's central bank on Wednesday opened the door to a possible rate cut as it acknowledged growing economic risks in a remarkable shift from its long-standing tightening bias that sent the Aussie dollar sliding.
Last night the US S&P 500 index dropped 0.9 per cent and commodity prices fell after another batch of weak German data stoked eurozone recession fears and White House economic adviser Larry Kudlow that there was a "sizeable distance" between the USA and China over trade.More news: Duke vs. Virginia live stream
According to the monetary statement, GDP growth forecasts is three-quarters of a percentage point lower than previously expected.
The RBA predicts consumption growth to be 2.75% rather than the 3% earlier estimated.
It similarly slashed its inflation forecast for the same period from 2.0 to 1.25 per cent.
Bloxham's view is very different to that of financial markets with a 25 basis point rate cut, taking the cash rate to 1.25%, fully priced by this time next year. Headline inflation is predicted to slump to 1.25 per cent in the year through June this year due to lower oil prices.More news: Recent Match Report - New Zealand vs India 2nd T20I 2019
The Aussie dollar was marginally lower at 71.03 USA cents on Thursday, having lost 1.8 per cent in the previous session, its largest percentage decline in more than a year.
The S&P-ASX 200 index initially shrugged off global trade-war fears that knocked Wall Street lower last night, but it dropped to close down 21 points, or 0.34 per cent, at 6071.5 as the Reserve statement revealed great concern than was evident in governor Philip Lowe's speech on Wednesday when he announced a change to a neutral stance. Some of that stems from efforts to rein in shadow financing as well as the impact of tariff increases.
Nevertheless, given the status of Chinese economy, battered by a stack of dismantling factory data, the Chinese import dependent Australian economy would likely to shrink eventually, echoing the lead of China, Germany, Italy and UK.
Friday's statement contained the usual forecasts for growth, inflation and unemployment - seen falling to 4.75 per cent in December 2020; but it also contained a separate sheet of more detailed forecasts on everything from household consumption to wages to public demand.More news: Second woman accuses Virginia's Lt Governor of sexual assault