The RBA meeting minutes released overnight struck a mostly positive tone with little in the way of significant changes to the bank’s outlook. The bank once again highlighted above-trend growth, a declining unemployment rate and gradual improvement in wage growth. Furthermore, the minutes show that the bank is comfortable with recent developments in the housing market despite out of cycle rate increases by some major banks.
Key points from the minutes
Commenting on domestic activity, the minutes said: “recent data had suggested that domestic growth had been above potential over the year to the June quarter, supported by strong public demand, resource exports, non-mining business investment, and steady consumption growth”.
Commenting on the labor market, the minutes said: “leading indicators had suggested that employment growth would be slightly above average in the period ahead “.
On the housing market, the minutes showed that the RBA is comfortable with weaker conditions though did note that price declines “had become more widespread across different suburbs and price segments”.
Commenting specifically on recent mortgage rate increases by some banks, the RBA said these “would imply a small rise in the average outstanding variable housing loan rate, unwinding about half of the decline observed in the average housing loan rate over the preceding year.”
On the global economy, the RBA said “GDP growth in most of Australia’s major trading partners had remained above trend” and that “global commodity prices had generally remained elevated, which had supported Australia’s terms of trade”.On the exchange rate, the minutes said: “modest depreciation of the Australian dollar was helpful for domestic economic growth.”
After piercing below the .7155 level, AUDUSD has since recovered and is on course to post its second positive week despite the escalation in the trade war between the US and China. If price can hold above this level, the risk of a further short squeeze grows, putting the focus on a move back up to test resistance at the .7503 level.