RBA on hold but AUD still heading lower

RBA (Tuesday) is expected to keep the cash rates at a record low of 2%, as strong house prices remain a major obstacle to a further cut. Annualized growth in national house prices accelerated to around 15% over May and June, and the governor has said that monetary policy must take into account risks to financial stability, even as another rate cut remains on the table. 

"We still see rates on hold at a record low of 2% for an extended period, albeit with the risk of a cut given the overvalued exchange rate and the RBA's frustration with the pace of growth outside the mining sector," says Barclays.

With RBA unlikely to provide much of a surprise, commodity price pressures should be the main driver of a further slide in the AUD.