The Reserve Bank of Australia’s June meeting minutes showed a considerably less hawkish board, focusing on the European debt crisis and a slower global economy rather than domestic inflation. Investors sought the safety of the US dollar as the bank expressed concerns that the recovery might stall pending fundamental problems.
Highlights from the meeting include:
“Prudent” to keep cash rate unchanged in June
Global economy risks “more prominent” over past month
European sovereign debt crisis causes great concern for global economy
Increased volatility in foreign exchange markets over European concerns
Moderate domestic data didn’t add urgency to rate increases
“Subdued” activity in non-resource (basic materials) areas of economy
Saw signs of “pickup” in resources investment
Credit growth in Australia “quite moderate”
Worries about a sluggish global recovery and growing concerns from weaker Chinese demand wiped the Australian dollar’s early gains. Additionally, the minutes showed that the central bank’s attention to inflation and growth being mainly driven by the mining industry, and has not spread to other parts of the economy, suggesting a possible suppression of rate increases in the near future. The US dollar gained against the Aussie dollar and other major pairs as investors’ risk appetite diminished following the minutes.
AUDUSD 5 minute chart; vertical line shows time of release. Chart generated with FXCM Strategy Trader.
EURUSD 5 minute chart; vertical line shows time of RBA minutes. Chart generated with FXCM Strategy Trader.
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