Australian Dollar, RBA’s Lowe Testimony Talking Points:
- The central message was ‘steady as she goes’ when Philip Lowe testified to Parliament
- The RBA sees no case for moving interest rates anytime soon
- However Lowe still insisted that the next move when it comes is more likely to be a rise
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The Australian Dollar slipped moderately Friday following comments from Reserve Bank of Australia Governor Philip Lowe which amounted to little more than ‘steady as she goes’ for monetary policy.
In his semiannual testimony to the Australian parliament, Lowe said that, while the next move for interest rates was more likely to be an increase than a cut, he saw ‘no strong case’ for any near-term adjustment to the current 1.50% Official Cash Rate –now stuck at that record low for more than two years.
He said that the view of his fellow rate setters was that rates should hold steady for a while yet, even though he said the economy was moving in a ‘good direction.’ The current policy stance remains appropriate until employment and inflation benchmarks are more clearly in sight, he added.
By some measures, the Australian economy is indeed heading in that good direction Lowe alluded to. Job creation has been particularly impressive. However, inflation remains stickily below target and consumer debt levels are stratospheric so there remains room for improvement.
In truth, there was nothing new here for Australian-Dollar watchers. The currency was hit hard this year by the swing around in interest-rate differentials to support the US Dollar. The Federal Reserve has relentlessly raised its own rates while the RBA has held steady. Indeed Australian futures markets do not now fully price even a quarter percentage point increase for all of next year and into 2020.
Still, AUD/USD inched down as Lowe spoke.
On its broader, daily chart, AUD/USD remains well within the long downtrend, which has plagued bulls for the vast majority of 2018.
With that yawning rate differential against it, and risk appetite sapped by worries over global trade and Turkey, the Australian Dollar is arguably still very short of fundamental support. Still, it has faced a lot of selling pressure in the past couple of weeks and may yet regain some momentum, if not likely for very long.
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--- Written by David Cottle, DailyFX Research
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