With not a lot of major data on the docket, Asian session forex traders only had to price in the RBA’s latest meeting minutes.
- New Zealand’s credit card spending up by 2.9% vs. 4.9% growth in September
- RBA minutes: “considerable uncertainty” on when wage inflation might occur
- Angela Merkel: “New elections are the better way”
RBA’s meeting minutes
A few hours ago the Reserve Bank of Australia (RBA) printed its meeting minutes for the month of November. If you recall, Governor Philip Lowe and his team had kept their interest rates steady at 1.50% for another month.
The minutes noted that members noted that their growth outlook has barely changed in the last three decisions. That is, the labour market would continue to improve, inflation is still expected to rise gradually, and GDP is still expected to grow by 3.0% over the next few years.
What caught the investors’ attention, however, are the members’ notes around wages, inflation, and consumption. See, improvements in labour demand are being met with increased labour participation, especially among women and older workers.
They also talked about strong competition among retailers, saying that it has “continued to restrain price rises” and even led some players to alter their business models to remain competitive.
RBA members now believe that we’ll see softer consumption growth in Q3 than in the previous quarter and that there’s “considerable uncertainty around when and how quickly wage pressures might emerge and about how much these would add to inflationary pressure.”
The factors above help fuel speculations that the RBA won’t be thinking about a rate hike at least until 2018 or even 2019. Heck, some are even whispering of a possible rate cut in the horizon!
All eyes will be on Governor Lowe, who is scheduled to give a speech in Sydney. Will he echo the RBA’s apprehensions over inflation? Or will he turn things around for the Aussie and pepper his statements with a hawkish remark or two?
Major Market Mover(s):
The Aussie took a step back against its major counterparts after the latest meeting minutes suggested that the RBA would continue to implement its easy monetary policies for longer.
AUD/USD is down by 10 pips (-0.13%) to .7540;
AUD/JPY is down by 19 pips (-0.22%) to 84.83;
EUR/AUD is up by 30 pips (+0.19%) to 1.5569, and
GBP/AUD is up by 41 pips (+0.23%) to 1.7571.
Watch Out For:
- 7:00 am GMT: Switzerland’s trade balance (3.21B CHF expected, 2.92B CHF previous)
- 9:05 am GMT: RBA Governor Lowe to give a speech in Sydney
- 9:30 am GMT: U.K.’s public borrowing (6.6B GBP expected, 5.3B GBP previous)
- 10:00 am GMT: BOE’s inflation report hearings
- 11:00 am GMT: U.K.’s CBI industrial order expectations (3 expected, -2 previous)