RBA: Reasonable to expect extended period of low rates

Dhwani Mehta FXStreet

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

Reasonable to expect extended period of low rates.

RBA will ease further if needed.

Gentle turning point appears to have been reached.

Economy still has spare capacity.

Australian dollar at lower levels of recent times.

Inflation pressures subdued and likely to be for some time.

Signs of turnaround in established housing markets, but new dwelling activity has weakened.

Took the decision to lower interest rates further today to support employment and income growth.

Forward-looking indicators of labor demand indicate that employment growth is likely to slow from its recent fast rate.

Economy still has spare capacity and lower interest rates will help make inroads into that

Recent outcomes suggest Australian economy can sustain lower rates of unemployment and underemployment.

Board also took account of the forces leading to the trend to lower interest rates globally.

In both headline and underlying terms, inflation is expected to be a little under 2 percent over 2020 and a little above 2 percent over 2021.

Credit conditions, especially for small and medium-sized businesses, remain tight.

The Aussie is seen fading the knee-jerk spike to 0.6765, now trading near 0.6735 region, as the RBA leaves doors open for further easing.

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.

GBP/USD: Daily gains remain capped by 1.3650

GBP/USD leaves behind Monday’s pessimism and advances marginally on Tuesday. Cable’s humble gains, however, appear to have met quite a decent resistance in the 1.3650 zone for now, in a context of a slight selling pressure hovering around the Greenback.

EUR/USD struggles to regain pace; gyrates around 1.1670

EUR/USD clinches humble gains around 1.1670 following Tuesday’s close on Wall Street. Indeed, marginal losses in the US Dollar encourages spot to set aside two dauly pullbacks in a row and maintain the 1.1700 barrier on the cross-hairs for now. Moving forward, US inflation tracked by the PCE and another revision of Q2 GDP data should keep investors entertained on Wednesday.

Gold: Buyers still hold the grip

Gold navigates the middle of its daily range near $4,650 per troy ounce on Tuesday. The lack of clear direction in the yellow metal comes on the back of the widespread cautious tone among market participants, a mildly offered stance in the US Dollar and a marked decline in US Treasury yields across the curve.

Australia CPI expected to show inflation easing in July

The Australian Bureau of Statistics (ABS) will publish the July Consumer Price Index (CPI) on Wednesday at 01:30 GMT. The report is expected to show that inflation rose 3.2% from a year earlier, easing from the 3.8% posted in June. The monthly CPI, however, is forecast at 0.8% following the -0.1% print from the previous month.

Canada hits US goods with tariffs; The rate market sees a problem

On September 8, Canada begins charging its own importers 15%, 25% and 50% on roughly 700 lines of American goods. The measure is billed as dollar for dollar, and on the arithmetic of covered trade it is. What it is not is a tax on the United States.