AUD: Cash Rate Lowered to 1.75%

AUD: Cash Rate Lowered to 1.75%

§  RBA cut cash rate by 25bps to record low of 1.75%, effective 4 May. The move was seen as a surprise to both markets and ourselves. Lower than expected inflation was cited as the factor.

§  Focus next on Federal Budget, which will be announced later today.  Moody’s has warned that Australia could lose its triple A credit rating unless stronger action is taken to reduce the growing budget deficit and rising debt levels. We warned that a cut in credit rating could weigh on AUD.

§  We continue to watch the support at 0.7550 (50 DMA, upward-sloping trend-line support from Jan and Mar lows).  A break below that on daily close basis could open doors for further downside towards 0.7450.