Market News & Analysis
RBA minutes reveal board discussed cuts; AUD edges lower
High-impact economic news:
18:30 GBP Average Earnings Index 3m/y
18:30 GBP Unemployment Rate
19:00 EUR German ZEW Economic Sentiment
22:30 CAD Manufacturing Sales m/m
The Australian dollar has edged lower late in the Australian forex session, following the release of the RBA minutes, from the April meeting. The AUD/USD pair was down 0.36% in late trade to 0.7145. Against the Japanese Yen, the Aussie fell 0.45% while the AUD/CAD declined 0.15%.
The sell-off comes after the RBA minutes confirmed a more dovish stance by the board. During the April meeting, the board left interest rates unchanged at a record low 1.5%. But a soften tone was evident in the Reserve Bank’s monetary policy statement, and today’s minutes confirmed the door is open to future rate cuts if the local economy deteriorates further.
“Members also discussed the scenario where inflation did not move any higher and unemployment trended up, noting that a decrease in the cash rate would likely be appropriate in these circumstances.
They recognised that the effect on the economy of lower interest rates could be expected to be smaller than in the past, given the high level of household debt and the adjustment that was occurring in housing markets.
Nevertheless, a lower level of interest rates could still be expected to support the economy through a depreciation of the exchange rate and by reducing required interest payments on borrowing, freeing up cash for other expenditure.”
Financial markets are now pricing in two interest rate cuts by the RBA this year.
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