Australian Dollar Firm After RBA Holds Rates

The Australian dollar was firm today after the Reserve Bank of Australia kept interest rates unchanged and showed no signs of turning more dovish than it already was. Australia’s economic data was mixed, not giving the Aussie a reason to go in any specific direction.
The RBA left its main interest rate unchanged at 1%, as was widely expected. It talked in the statement about the global economy and risks from trade wars:

The outlook for the global economy remains reasonable, although the risks are tilted to the downside. The trade and technology disputes are affecting international trade flows and investment as businesses scale back spending plans due to the increased uncertainty.

As for the outlook for the domestic economy, it was fairly decent:

Economic growth in Australia over the first half of this year has been lower than earlier expected, with household consumption weighed down by a protracted period of low income growth and declining housing prices and turnover. Looking forward, growth in Australia is expected to strengthen gradually to be around trend over the next couple of years.

All in all, the central bank did not change its stance much, saying:

It is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target. The Board will continue to monitor developments, including in the labour market, and ease monetary policy further if needed to support sustainable growth in the economy and the achievement of the inflation target over time.

As for economic data, the Australian Bureau of Statistics reported that retail sales fell by 0.1% in July from June on a seasonally adjusted basis instead of rising by 0.2% as analysts had predicted. The seasonally adjusted current account turned from a deficit of A$1.1 billion in the March quarter to a surplus of A$5.9 billion in the June quarter, exceeding the average forecast of A$1.5 billion.
AUD/USD traded at 0.6724 as of 10:36 GMT today after opening at 0.6714 and falling to the daily low of 0.6687. EUR/AUD dropped from 1.6330 to 1.6251. AUD/CHF edged up from 0.6650 to 0.6661.

If you have any questions, comments, or opinions regarding the Australian Dollar, feel free to post them using the commentary form below.

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