The Australian dollar was mixed against its most-traded counterpart during today’s trading session but was generally holding ground. The session was very light in terms of macroeconomic releases, with only notable ones being the minutes of the latest monetary policy meeting released by the Reserve Bank of Australia and US housing data.
The RBA released today the minutes of the meeting that happened on August 4. At the meeting, the Board decided to keep the stimulus package unchanged, which means that the benchmark interest rate remained at 0.25%. The notes talked about the impact of the coronavirus pandemic and the measures to contain it on the Australian economy:
The Australian economy was going through a very difficult period and was experiencing the biggest shock to economic activity since the 1930s.
As for how the economy will fare in the near future, the RBA said:
Nevertheless, members noted that the downturn had not been as severe as earlier expected and a recovery was under way in most of Australia. The recovery was, however, likely to be slower than earlier expected, with the COVID-19 outbreak in Victoria having a major impact on the economy.
As for the monetary policy, the Board members decided that there are no reasons to change it yet but they are going to monitor the situation:
Members reaffirmed that there was no need to adjust the package of measures in Australia in the current environment. Members agreed, however, to continue to assess the evolving situation in Australia and did not rule out adjusting the current package if circumstances warranted.
Policymakers do not plan interest rate hikes until strong economic recovery becomes evident:
The Board determined that it would not increase the cash rate target until progress is made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.
Later this week, Markit will release its flash Purchasing Managers’ Indices for the manufacturing and services industries in Australia in August. They can show how strong (or weak) the recovery of the Australian economy is, and that can have a big impact on the Australian currency. In the meantime, the Aussie will most likely be driven by outside factors, including news about the US-China trade spat.
AUD/USD rose from 0.7213 to 0.7252 as of 12:43 GMT today. EUR/AUD was up from 1.6446 to 1.6463 but retreated from the daily high of 1.6488. GBP/AUD went up from 1.8156 to 1.8197.
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