The relative strength of the Australian economy could lead speculators to the conclusion that the Reserve Bank of Australia may be a contender to follow the hawkish tilt that was obvious in the Fed’s June FOMC meeting. However, since then RBA Governor Lowe has suggested in his June keynote speech that the RBA sees no particular risk to the medium-term inflation outlook, economists at Rabobank think the central bank will cast a dovish light on its July policy announcements.
Still dovish?
“The RBA has long-standing concerns about the slow pace of wage growth and this was reiterated in Lowe’s June key note speech. Even before the crisis this was not far about record lows. Although the Australian economy has recently been performing better than expected and inflation expectations have crept higher (albeit only to the forecasts of the RBA), the view that there is excess capacity in the labour market provides the RBA a strong reason to anticipate that inflationary pressures will remain subdued over the medium-term.”
“Another reason for caution stems from more recent news regarding lockdowns and COVID-19. Beyond the pandemic the impact on trade from the worsened relationship with China is also a consideration for the RBA.”
“We have maintained for some that AUD/USD will likely struggle to maintain levels above 0.78 to a 6-month view and the recent strengthening in the value of the USD underpins this view. We have lowered our 1-month forecast from 0.77 to 0.76.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD retreats toward 1.0850 on modest USD recovery
EUR/USD stays under modest bearish pressure and trades in negative territory at around 1.0850 after closing modestly lower on Thursday. In the absence of macroeconomic data releases, investors will continue to pay close attention to comments from Federal Reserve officials.
GBP/USD holds above 1.2650 following earlier decline
GBP/USD edges higher after falling to a daily low below 1.2650 in the European session on Friday. The US Dollar holds its ground following the selloff seen after April inflation data and makes it difficult for the pair to extend its rebound. Fed policymakers are scheduled to speak later in the day.
Gold climbs to multi-week highs above $2,400
Gold gathered bullish momentum and touched its highest level in nearly a month above $2,400. Although the benchmark 10-year US yield holds steady at around 4.4%, the cautious market stance supports XAU/USD heading into the weekend.
Chainlink social dominance hits six-month peak as LINK extends gains
-637336005550289133_XtraSmall.jpg)
Chainlink (LINK) social dominance increased sharply on Friday, exceeding levels seen in the past six months, along with the token’s price rally that started on Wednesday.
Week ahead: Flash PMIs, UK and Japan CPIs in focus – RBNZ to hold rates
After cool US CPI, attention shifts to UK and Japanese inflation. Flash PMIs will be watched too amid signs of a rebound in Europe. Fed to stay in the spotlight as plethora of speakers, minutes on tap.