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 clings to gains near 1.3400

GBP/USD retreats after reaching a three-week high above 1.3430, challenging the 1.3400 yardstick on Thursday. Although easing political uncertainty in the UK helps the quid limit its downside, escalating tensions in the Middle East support the Greenback, keeping Cable under scrutiny.

EUR/USD: Daily gains appear capped by 1.1450

EUR/USD keeps the recovery in place and looks to consolidate its gains north of 1.1400 the figure at the end of the NA session on Thursday. The pair’s move higher appears in tandem with a modest pullback in the US Dollar despite geopolitical concerns in the Middle East remain unabated.

Gold flirts with two-day highs, approaches $4,130

Gold stages a modest rebound on Thursday, setting aside a three-day losing streak and managing to surpass the $4,100 mark per troy ounce. However, steady geopolitical tensions have revived concerns over persistently high global inflation, reinforcing expectations of higher rates across the board and somewhat curtailing the yellow metal’s upside potential.

AAVE eyes $100 after Stable Vaults launch

Aave edges higher above $90.00 at the time of writing on Thursday, amid broader price stabilization in the crypto market. The company has announced Stable Vaults, a platform that allows businesses to integrate fixed-rate stablecoin yield, mildly lifting sentiment in the ecosystem.

Japan may be changing its Yen strategy, but markets don’t look scared

Japan may be changing its intervention playbook, but that might not be enough to rescue the battered Yen. With USD/JPY hovering at four-decade highs, the currency’s weakness is being driven less by speculative pressure and more by a powerful structural force: the wide US-Japan rate gap.

Bye, forward guidance: How to trade when central banks choose silence

Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance.