Morgan Stanley preview of the Reserve Bank of Australia monetary policy meeting on May 7 2019.

Morgan Stanley say that the RBA is unlikely to cut rates. MS reckon that in order for the RBA to cut:

  • employment would need to weaken
  • economic growth would need to weaken further

And add that the weak Q1 inflation result is not enough to take the RBA focus away from the jobs market.

MS does expect the RBA to cut, but not until November

  • and another to follow in Feb 2020

For the Australian dollar, MS like it higher, citing as supportive:

  • stretched short positioning
  • strong negative sentiment leaves a long as giving good risk / reward
  • China rebound expected

Further out MS suggest AUD is a sell:

  • are cautious on high levels of household debt and possible impact on the economy from deleveraging