The Australian dollar declined today against other most-traded currencies. While the general market sentiment was unfavorable to riskier commodity currencies, analysts argued that the main reason for the Aussie’s decline was the release of the central bank’s monetary policy minutes. Domestic macroeconomic data was poor but better than pessimistic forecasts.
The Reserve Bank of Australia released minutes of its monetary policy meeting, which happened on September 3 and resulted in no change to the policy. Australian policymakers voiced concerns about the US-China trade conflict:
The trade disputes between the United States and China had escalated and growth in China had continued to slow. There had been further indications that these developments were affecting trade and investment decisions in overseas economies, although businesses had continued hiring and labour market conditions had remained tight.
They were also concerned about some developments in Australia. The minutes noted that despite strong employment growth “the unemployment rate had remained steady at around 5.2 per cent over recent months” and “wages growth had remained low and there were few indications that wage pressures were building”. And on top of all that, the RBA signaled that interest rate cuts remain a distinct possibility:
Members would assess developments in both the international and domestic economies, including labour market conditions, and would ease monetary policy further if needed to support sustainable growth in the economy and the achievement of the inflation target over time.
As for macroeconomic data, the Australian Bureau of Statistics reported that the House Price Index fell by 0.7% in the June quarter from the previous three months. It was still a better reading than a drop of 1.0% predicted by experts and a slump of 3.0% registered in the March quarter.
AUD/USD dropped from 0.6864 to 0.6837 as of 9:10 GMT today. EUR/AUD jumped from 1.6021 to 1.6100. AUD/JPY slid from 74.19 to 73.96.
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