AUD/USD Extends Drop as RBA Frets About Housing, Labor Markets
- AUD/USD briefly rose before extending intraday drop on minutes from April RBA meeting
- RBA sees housing market risks as property price growth outpaces wage gains in some areas
- Recent rise in the unemployment rate to 5.9 percent, decline in consumer confidence noted
The Australian Dollar briefly popped up 0.12 percent before resuming its intraday down trend lower following the release of minutes from the Reserve Bank of Australia’s April policy meeting.
The comments focused on some of the risks facing the Australian economy, such as a weaker than expected labor market. The unemployment rate increased to 5.9 percent in February while other labor market indicators pointed to weaker wage growth.
Household consumption was observed as weaker than expected, with retail sales falling “slightly” in February. Consumer confidence was also observed to be dropping “below-average levels”. Inflation from the retail sector has been largely subdued, with the RBA maintaining their forecasts for rents and prices to grow marginally at most.
According to the meeting minutes, housing credit continues to outperform household incomes, which the RBA suggests is a sign of rising housing market risks. The bank noted recent macro-prudential measures taken to stem risk from the housing market, but acknowledged the impact of these decisions might take some time to be observed.
The release also noted RBA expectations for gradual inflation growth, with prices expected to pick up to above 2 percent over 2017. However, labor cost measures and wage growth continue to be subdued, weighing down on overall price growth trends.
The RBA felt that given current conditions in the labor market, the housing sector and subdued inflation growth, holding monetary policy at current levels would be best for consistent growth.
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