The Australian dollar initially founds its legs after the release of the RBA policy meeting minutes with price action breaking 103 US cents for the first time in two-weeks. While acknowledging ongoing risks and potential further deterioration from the Euro-region and United States, the minutes provide a slightly hawkish lean than anticipated with members noting signs the domestic economy has improved, while “growth in domestic activity in China may not be slowing much further.” In essence, with the impact of previous reductions of the cash rate yet to fully infiltrate the economy, relative stability both locally and abroad has now provided the RBA the time to further assess forthcoming data points, with the next primary risk event likely to be local consumer price data next week.
To recap events earlier in the session, the rate of inflation in the UK slid to a 31-month low of 2.4 percent in June short of expectations and previous growth of 2.8 percent. Core inflation with excludes the volatility food and energy components rose 2.1 percent from the previous year. The retail focus prices gauge also reflected a softer rate of inflation falling to 2.8 percent on year from a previous 3.1 percent. With inflation significantly lower from its peak of 5.2 percent in late 2011, the latest print adds credence to the Bank of England’s recent decision to step-up asset purchases by £50 billion, bringing the total value to £375 billion. The Bank of England’s target for inflation is 2 percent.
Economic releases this morning include the Westpac leading Index, Chinese Property Prices and Tool Orders from Japan later in the session. At the time of writing the Australian dollar is buying 103.1 US cents.
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