RBA: Bushfires, coronavirus will temporarily weigh on growth

Dhwani Mehta FXStreet

Following are the key headlines from the February RBA monetary policy statement (via Reuters):

To ease policy if needed to support sustainable growth.

Rates to remain low for extended period.

Will monitor developments in labor markets.

Lower cash rate has put downward pressure on A$.

Low rates are boosting asset prices which should lead to increased spending.

Scenario for Australian economy to grow by 2.75% this yr; 3% next year.

Central scenario for underlying inflation to be close to 2% in 2020.

Signs of a turnaround in housing market, especially in Sydney and Melbourne.

Bushfires, coronavirus will temporarily weigh on growth.

Consumption growth expected to pick up gradually.

Unemployment expected to remain around current level for some time.

Wage growth expected to remain at current level for some time.

Too early to determine how long-lasting the impact from coronavirus will be.

China-US trade, technology dispute, coronavirus are all sources of uncertainty for global growth.

FX Implications

The Aussie dollar popped over 30-pips vs. the US dollar on the RBA's no interest rate change decision, with AUD/USD reaching a new three-day high at 0.6726.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

EUR/USD meets initial support around 1.1800

EUR/USD remains on the back foot, although it has managed to reverse the initial strong pullback toward the 1.1800 region and regain some balance, hovering around the 1.1850 zone as the NA session draws to a close on Tuesday. Moving forward, market participants will now shift their attention to the release of the FOMC Minutes and US hard data on Wednesday.

GBP/USD bounces off lows, retargets 1.3550

After bottoming out just below the 1.3500 yardstick, GBP/USD now gathers some fresh bids and advances to the 1.3530-1.3540 band in the latter part of Tuesday’s session. Cable’s recovery comes as the Greenback surrenders part of its advance, although it keeps the bullish bias well in place for the day.

Gold remains offered below $5,000

Gold stays on the defensive on Tuesday, receding to the sub-$5,000 region per troy ounce on the back of the persistent move higher in the Greenback. The precious metal’s decline is also underpinned by the modest uptick in US Treasury yields across the spectrum.

RBNZ set to pause interest-rate easing cycle as new Governor Breman faces firm inflation

The Reserve Bank of New Zealand remains on track to maintain the Official Cash Rate at 2.25% after concluding its first monetary policy meeting of this year on Wednesday.

UK jobs market weakens, bolstering rate cut hopes

In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months.

Ripple slides to $1.45 as downside risks surge

Ripple edges lower at the time of writing on Tuesday, from the daily open of $1.48, as headwinds persist across the crypto market. A short-term support is emerging at $1.45, but a buildup of bearish positions could further weaken the derivatives market and prolong the correction.