THE RBA DECIDED TO LEAVE THE OFFICIAL CASH RATE ON HOLD AT 1.50% AT ITS MEETING TODAY, THIS WAS IN LINE WITH ECONOMISTS EXPECTATIONS. THE CASH RATE HAS BEEN AT 1.50% SINCE LAST YEAR. WITH THE CASH RATE UNCHANGED WE HAVE SEEN A SURGE IN THE AUSSIE DOLLAR RECENTLY. THE AUSSIE DOLLAR HAS APPRECIATED BY 5% ON A TRADE-WEIGHTED BASIS SINCE MAY, AND BY 7% AGAINST THE US DOLLAR. SPECULATIVE LONG POSITIONS ARE AT THEIR HIGHEST LEVEL IN FOUR YEARS. ECONOMIC INDICATORS APPEAR TO REFLECT A BUOYANT ECONOMY, WITH INVESTMENT OUTLOOK SHOWING SOME POSITIVES. AS MENTIONED BY GOVERNOR LOWE IN HIS SPEECH, LOW INTEREST RATES HELPS THE AUSTRALIAN ECONOMY. IT SUPPORTS EMPLOYMENT GROWTH AND A RETURN OF INFLATION TO ITS AVERAGE LEVEL.

THE UNEMPLOYMENT RATE DROPPED A BIT AS GROWTH IN THE NUMBER OF AUSTRALIANS WITH JOBS HAS PICKED UP IN RECENT MONTHS. EMPLOYMENT GROWTH IS EXPECTED TO BE BROADLY CONSISTENT WITH LABOUR FORCE GROWTH. UNEMPLOYMENT IS EXPECTED TO EDGE LOWER TO JUST UNDER 5 AND A HALF PER CENT AT THE END OF 2017. GDP GROWTH IS EXPECTED TO CONTINUE RECOVERING AS THE DRAG FROM FALLING MINING INVESTMENT IS EXPECTED TO COME TO AN END AND THE INCREASE IN RESOURCE EXPORTS IS EXPECTED TO CONTINUE.
GROWTH IN THE ECONOMY IS EXPECTED TO STRENGTHEN GRADUALLY TO BE AROUND 3% IN THE FIRST HALF OF 2018. MEASURES OF UNDERLYING INFLATION ARE EXPECTED TO REACH AROUND 2% OVER THE SECOND HALF OF 2017 & INCREASE A LITTLE THEREAFTER. HEADLINE INFLATION IS FORECAST TO RISE GRADUALLY & BE BETWEEN 2 & 3 PER CENT.

KEY UNCERTAINTIES
– GLOBALLY, THE CURRENT EXPANSION COULD BE MORE SELF-SUSTAINING THAN THE BANK, OR OTHER FORECASTERS EXPECT.
– ESCALATING GEOPOLITICAL TENSIONS OR INCREASED GLOBAL TRADE PROTECTIONISM COULD DERAIL THE ONGOING RECOVERY.
– DOMESTICALLY, THERE IS THE RISK THAT HOUSEHOLD SPENDING GROWTH COULD BE MORE CONSTRAINED THAN EXPECTED BY LOW REAL WAGE & HIGH DEBT LEVELS.

GOVERNOR LOWE’S KEY QUOTES
– ”THE RECENT DATA HAS BEEN CONSISTENT WITH THE BANK’S EXPECTATION THAT GROWTH IN THE AUSTRALIAN ECONOMY WILL GRADUALLY PICK UP OVER THE COMING YEAR.”
– ”THE OUTLOOK FOR NON-MINING INVESTMENT HAS IMPROVED RECENTLY & REPORTED BUSINESS CONDITIONS ARE AT HIGH LEVELS.”
– ”HOUSING PRICES HAVE BEEN RISING BRISKLY IN SOME MARKETS, ALTHOUGH THERE ARE SIGNS THAT CONDITIONS ARE EASING…RESIDENTIAL CONSTRUCTION ACTIVITY REMAINS AT A HIGH LEVEL, BUT LITTLE FURTHER
GROWTH IS EXPECTED.”
– ”WAGE GROWTH REMAINS LOW…THIS IS LIKELY TO CONTINUE FOR A WHILE YET, ALTHOUGH STRONGER CONDITIONS IN THE LABOR MARKET SHOULD SEE SOME LIFT IN WAGES GROWTH OVER TIME.”
– LOWE ALSO REITERATED THE CURRENCY ”IS EXPECTED TO CONTRIBUTE TO THE SUBDUED PRICE PRESSURES IN THE ECONOMY, ITS ALSO WEIGHING ON THE OUTLOOK FOR OUTPUT AND EMPLOYMENT. AN APPRECIATING
EXCHANGE RATE WOULD BE EXPECTED TO RESULT IN A SLOWER PICK-UP IN ECONOMIC ACTIVITY AND INFLATION THAN CURRENT FORECAST.”

FOR MORE INFO FOLLOW THE LINKS BELOW:
GOVERNOR LOWE’S SPEECH
RBA STATEMENT

AUDUSD DAILY

MARKET IS BULLISH, 21 ABOVE THE 55. IMMEDIATE RESISTANCE AT MR1. IMMEDIATE SUPPORT AT MM2 & MS1. STOCHASTICS HEADING NORTH. PRICE OPENED @ MPP WHICH PREDICTS A TARGET AT MR2.

AUDUSD H4

MARKET IS BULLISH, 21 ABOVE THE 55. PRICE IS BULLISH, 5 EMA IS ABOVE THE 8 EMA. STOCHASTICS HEADING NORTH. RESISTANCE IDENTIFIED AT WR1/WM4/WR2 WHICH COINCIDES WITH MR1. SUPPORT IS IDENTIFIED BY THE GREEN BARS. I WILL CONSIDER GOING SHORT @ MR1/WM4/WR2.

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