There were hardly any market-movers during the Asian session, so forex traders focused on pricing in RBA’s latest meeting minutes. Meanwhile, the dollar extended its gains from the previous session.
- China’s markets out on a week-long holiday
- RBA worried over sustainability of wage growth pace and impact on consumption
RBA’s meeting minutes
With not a lot of other catalysts, market players paid extra attention to the Reserve Bank of Australia’s (RBA) meeting minutes release.
The RBA believes that domestic data are generally “in line with, or a little stronger than, expectations.” Business conditions, for one thing, are “stronger than expected” even as household sector conditions are “a little weaker.” Of course, it might have helped that investment in the resources sector offset overall declines in mining investments.
What caught the investors’ attention was the RBA’s apparent concern over wage growth and its impact on domestic consumption.
The RBA worries that:
“…business conditions had improved over 2017 but growth in consumption had continued at a relatively modest pace, constrained by low household income growth despite stronger-than-expected employment growth and a decline in the unemployment rate over 2017. Even with the strength in the labour market, wage growth was yet to pick up.”
This is a bad omen considering that
“…the staff had forecast growth in employment to ease over the subsequent couple of years…”
“…some spare capacity in the labour market would remain over the forecast period…”
In a nutshell (emphasis mine),
“There was still a risk that growth in consumption might turn out to be weaker than forecast if household income growth were to increase by less than expected. In an environment of high household indebtedness, consumption might be particularly sensitive to adverse developments in household income or wealth.”
Mixed risk sentiment
Unlike in yesterday’s trading, a lack of economic catalysts did NOT translate to risk-taking for the higher-yielding assets.Word around the hood is that some traders are staying in the sidelines ahead of higher-tier reports scheduled during the London session.
- Nikkei is down by 1.02% to 21,922.6;
- Australia’s A SX 200 is up by 0.46% to 5,924.5, and
- Hang Seng is up by 0.12% to 31,151.7.
Commodities didn’t stand a chance, however.
- Gold is down by $1,341.28;
- Brent crude oil is down by 0.17% to $65.41, and
- U.S. WTI is down by 0.42% to $62.19.
Major Market Mover(s):
The Australian dollar initially sold off on the back of RBA’s concerns over domestic consumption, but eventually found support as more traders priced in a generally upbeat assessment of the Australian economy.
AUD/JPY is up by 20 pips (+0.24%) to 84.53;
EUR/AUD is down by 29 pips (-0.18%) to 1.5648;
GBP/AUD is down by 31 pips (-0.17%) to 1.7652, and
AUD/NZD is up by 29 pips (+0.27%) to 1.0761.
Asian session traders caught up to their U.S. counterparts and extended the dollar’s bullish momentum from the previous session.
USD/JPY is up by 20 pips (+0.18%) to 106.78;
USD/CHF is up by 14 ipips (+0.15%) to .9304;
EUR/USD is down by 19 pips (-0.15%) to 1.2388, and
GBP/USD is down by 20 pips (-0.14%) to 1.3975.
Watch Out For:
- 7:00 am GMT: Switzerland’s trade balance (2.78B CHF expected, 2.63B CHF previous)
- 7:00 am GMT: Germany’s PPI (0.5% expected, 0.2% previous)
- 10:00 am GMT: Germany’s ZEW economic sentiment (16.5K expected, 20.4K previous)
- 10:00 am GMT: Euro Zone ZEW economic sentiment (28.4K expected, 31.8K previous)
- 11:00 am GMT: U.K.’s CBI industrial order expectations (12 expected, 14 previous)