Where is AUD/USD Headed After RBA Minutes and Wages Numbers?
The Australian dollar experienced a decline of 50 basis points to start the week yesterday, causing it to slip below the 0.65 mark. This represented a decrease of 0.12% from the previous day. Lately, the Australian dollar has encountered a period of significant turbulence since it reversed just below 0.69 by the middle of July. Over the course of last week, the currency saw a depreciation of 1.20% against the USD while iit has declined 3.40% so far this month, and the pressure currently remains on the downside.
Yesterday this pair reached the lowest level since November, hitting a bottom at 0.6450s. It subsequently experienced a recovery, pushing back towards the 0.6500 level which seems to have turned into resistance now. Despite the rebound, the price continues to face downward pressure, largely attributed to the buying momentum in the US Dollar. Today is anticipated to be a day filled with notable activity, as significant economic data releases are expected from both Australia and the United States.
Earlier we had the Reserve Bank of Australia (RBA) meeting minutes, as well as the wages figures for July. Central banks are currently closely monitoring wages data to detect any indications of a potential wage-price spiral. In the case of Australia, the Wage Price Index for the second quarter (Q2) Year-over-Year (Y/Y) was projected to reach 3.8%, an increase from the previous figure of 3.7%. Additionally, the Quarter-over-Quarter (Q/Q) reading is anticipated to be 1.0%, compared to the previous 0.8%.
Australian Wage Price Index for July
- Q2 wage price index 0.8% vs 0.9% expected
- Q1 wage price index was 0.8%
- YoY wage price index 3.6% vs 3.7% expected
- Prior Yoy wage price index was 3.7%
Reserve Bank of Australia minutes, Headlines via Reuters
- Board considered raising rates by 25bp or holding steady
- Board agreed on case for holding rates steady was the stronger one
- Board saw a “credible path” back to the inflation target with cash rates at current 4.1%
- Board agreed it was possible some further tightening might be needed
- Need for further hike would depend on data, evolving assessment of risks
- Inflation heading in the right direction, though service inflation too high
- Consumption had slowed significantly even as the full effect of past tightening yet to be felt
- The labour market had been resilient, but early signs it might be at a turning point
- Board saw “plausible scenarios” where inflation took longer than acceptable to return to target
- Controlling persistent inflation would require more rate rises than otherwise
- Staff inflation forecast had assumed one more hike, rates notably lower than in other countries
- Rise in housing prices could mean financial conditions not as tight as assumed
While the RBA is keeping its options open these don’t read as minutes indicating the Bank is keen on raising the cash rate again. The default position now appears to be holding the cash rates steady.
AUD/USD Live Chart
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