I agree, some probability of an August cut should be priced. I'd put it at one-in-five to one-in-ten, right now. That changes as we get closer to the meeting. From Bell Potter's Glen Ford:
Nowotny discussion about ESM banking licence is a big deal, a sovereign backed institution with capability of to implement concept of 'fractional reserve bank lending' with a 'donation' comprising EUR 500bln of capital essentially creates a quasi European reserve bank. This thing is a tactical nuclear financial weapon the Europeans were looking for if they could get it off the ground. The EUR has quite a large short position, it is surprising that mention of a ESM banking licence by ECB member didn't trigger a more aggressive risk on covering rally. Given uninspiring USD weakness in this time zone it is difficult to follow through with lightening too many 3yr bond longs or even hitting that 96.555 bid in August IB's. August IB's are just an option now, considering RBA meeting isn't until August 7th there is still too much time to completely price out a August rate cut.
