AUD traders note: RBA meeting today, no rate change expected, economic risks building

A preview of the Reserve Bank of Australia meeting today. The announcement is scheduled for 0430GMT.

The really, really quick preview is that there is no change in interest rate expected.

• I posted yesterday that surveys of economists show none are expecting a rate change. There is more at that post; if you're trading the AUD its worth a read for background on today's decision.
• Ryan posted Goldman Sachs' thoughts here yesterday also
• Greg has a technical analysis preview, here

What will be noted, though, is the accompanying statement to the decision from Governor Stevens. Expect comments specifically on weaker growth.

For example, yesterday we got Australian data (company profits and inventories) :

Q2 Company Operating Profits -1.9%

• expected -1.8%, prior was -0.3% (revised from +0.2%)

Q2 inventories flat at 0.0%

• expected 0.2%, prior was 0.6% (revised from 0.4%)

That inventories number will subtract from growth (around a -0.2% impact on Q2 GDP). Whats troubling also is that retail sales are on the soft side and inventory build is not taking place in response.

We get Australian Q2 GDP data on Wednesday (the RBA will have the figure going into today's meeting ... if we do get a shock rate cut from the bank today it'll be because the GDP data is much weaker than market expectations), expectations are currently around +0.4% (and 2.2% y/y) (ps. Q1 results was a strong +0.9% and +2.3% y/y ... ) ... with the risk being weaker than expected. Risks of negative growth for the quarter are small, but cannot be dismissed entirely.

Its not all doom and gloom, though, yesterday's private credit numbers showed the best growth in business credit (+0.7% m/m) since January.

A key risk is, of course, China. Falling stockmarkets are in creasing financial market volatility, and the weakening economy is weighing particularly heavily on the Australian economy. Weak terms of trade are a manifestation of this, with national income weaker as a result. Watch for comments on this in the statement.

-

Note ... ahead of the RBA announcement today we also get trade data for August. More to come on this.