RBA Minutes Show Optimistic But Uncertain Outlook

Nov 15 2016, 1:49 pm
RBA minutes

RBA Cite Broadly Balanced Risks

The RBA meeting minutes released overnight reflected optimism on behalf of the bank though did suggest some uncertainty in the outlook. The bank noted that underlying inflation is expected to return to normal levels over time and the overall assessment is that risks around inflation were “broadly balanced”. The economy was noted as growing close to potential over the next few quarters before picking up further, however, the RBA did note that a rising Australian Dollar could complicate the economic transition.

The upward revision to the terms of trade outlook was noted as a “marked change” and positive for the economy with members noting that bulk commodity prices have increased significantly.  The bank noted that holding policy steady at this meeting is consistent with growth and inflation goals. Additionally, the bank judged that there are some signs that wage growth had stabilised, but there is considerable uncertainty on labour market strength and whilst the jobless rate is expected to edge down, unemployment remains elevated.

The minutes also revealed the bank’s concern for the significant uncertainty around household consumption, especially for heavily indebted households. Referring to the housing market the bank noted that house prices have picked up in Melbourne and Sydney. Housing turnover and credit have slowed with a large supply of apartments to come on stream.

Finally, referring to global economic conditions the bank noted that a steadier China economy has reduced downside risks to the global growth outlook whilst risks to global inflation are also more balanced at this time.

In all the minutes reflected a positive tone with the bank noting the positive effects of commodity gains and the stabilising effect of a steadier China economy. Whilst inflation remains low; it is expected to pick up, and for now, the ban are comfortable with the AUD exchange rate though again, a higher AUD would complicate the outlook.


Having sold off from a test of bearish trend line resistance on the US election result, For now, the Aussie is currently sitting on the trend line support of the broad bullish channel that has framed price action this year. A break here opens up a test of initial structural support at the July and September lows around .7438/.7462.

Data Flash

UK CPI was lower than expected in October with the headline reading printing 0.9% against and expected 1.1% and the Core reading printing 1.2% vs. 1.4% expected.  Core inflation has been particularly volatile this year, and with the prior reading marking the highest level of the year, Core inflation has now fallen back to the lowest level since January.

In the EuroZone, German 3Q GDP was weaker than expected with the n.s.a reading printing 1.5$ vs 1.6% expected and the w.d.a reading printing 1.7% vs. 1,8% expected. EuroZone  3Q GDP  came in in line with expectations at 1.6% QoQ, and 0.3% YoY whilst EuroZone ZEW Economic Sentiment improved to 15.8 from 12.3 previous.


EURUSD has sold off sharply in the wake of the US elections moving from around 1.13 to mid 1.07. Price is now headed for a test of key technical support at the rising trend line support from last years lows as well as short term bearish channel support.

Looking Ahead

Traders will be paying close attention to the US Retail Sales figures for October expected to print at 0.5% vs. 0.6% prior. Retail Sales are a key input into the GDP data and as such are typically a significant market mover with traders using the data to gauge the strength of the economy.


Ahead of the data, the US Dollar Index is sitting just below three years highs and bullish channel resistance having broken out to new 2016 highs in response to the US elections.

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With over 6 years’ experience analysing currency markets, James is now a well-known industry analyst focusing on price action trading and fundamental drivers. Beginning as a private retail trader, James developed a strong interest in understanding the fundamental aspect of the market before pursuing technical trading capabilities which he now uses to identify opportunities over a short-term horizon. Alongside his market experience, James is also IMC certified having achieved the qualification to help further his understanding not only of the markets but the industry as a whole. James has a strong interest in both fundamentals and technicals and uses both forms of analysis in generating and executing trade ideas, with trades generally lasting from a few hours to a few days.