Monthly Insights BY THE CURVE TEAM –

With over 100 years of collective financial markets experience behind us, we have created Curve’s monthly insights, highlighting important global economic data and providing in-depth analysis to help you better understand the current economic climate.

Our most recent monthly insight papers are available for download with our compliments.

Second Wave Threatens Outlook

  • Australia’s early success in containing the virus is slowly coming undone as community transitions in Victoria start to spread.
  • The RBA remains committed to doing all it can to support the economy and ensure that the price and availability of credit will support any recovery.
  • However, with little room left to have a meaningful impact and its measures still under-utilised, pressure is mounting on the government to steer the economy through the crisis.
  • With the spread of the virus gaining pace and crossing into NSW and Queensland, the outlook for the economy is at the crossroads and the next few weeks will be crucial.

RBA Remains Concerned About the Outlook Without Further Policy Initiatives

  • Containment measures continue to be rolled back and the data suggests that the worst is now behind us.
  • Monetary policy once again remained unchanged over the month with the RBA remaining “committed to do what it can to support jobs, incomes and businesses.”
  • In his appearance before the Covid-19 Parliamentary Committee, Governor Lowe spoke candidly about how much more room monetary policy has left and what else the RBA could do if required.
  • He also voiced concerns over the long run prospects for the economy if unemployment remains high for too long and if structural issues facing the economy weren’t addressed.

A big unknown hanging over the outlook

  • The focus is quickly shifting from the containment of Covid-19 to winding back the containment measures and opening up the economy.

  • Monetary policy remained unchanged over the month with the RBA remaining “committed to do what it can to support jobs, incomes and businesses”.

  • In their quarterly Statement on Monetary Policy the RBA revealed their latest forecasts as well as other scenarios.

  • Given the unprecedented nature of recent events, there is considerable uncertainty over the outlook with the RBA facing a great unknown.

Slower for Longer

  • The outlook for the economy continues to develop as the fight to contain Covid-19 remains the focal point.
  • At their emergency meeting the RBA cut the cash rate to the lower bound of 0.25% and commenced quantitative easing to support the economy.
  • Volatility across markets has continued with the focus on the health fight, not the longer-term implications for the economy.
  • While the near-term outcomes will be determined by the health crisis, longer term implications are starting to emerge.

Rapidly Deteriorating Outlook Has Everyone On Edge

  • The outlook for the economy has shifted dramatically in March amid further spreading of the Covid-19 Virus and outbreak of an oil price dispute between Russia and OPEC.
  • This saw the RBA cut the cash rate to 0.50% in March with a promise of further easing, along with fiscal support from the federal government.
  • Market instability was a broad theme throughout the month as Covid-19 and Oil disturbances caused heavy sell-offs and impacted investor confidence.
  • With uncertainty about the extent of the virus outbreak, emergency fiscal and monetary policy measures may be required with the only certainly being a continued volatility for the immediate short term.

History Repeating Itself

  • The RBA left the cash rate on hold at 0.75% in February, as was widely expected.

  • Recent employment and inflation data was enough to support the RBA’s ‘gentle turning point’ narrative. 

  • In their recent commentary the RBA outlined what would be seen as a trigger for further rate cuts.

  • Despite the RBA’s panglossian view on the outlook, risks remain skewed to the downside.