The minutes of the RBA’s February meeting did little to inspire confidence in AUD bulls.
Following on the from the meeting where the RBA stated that rate cut scenarios were now just as likely as rate hike scenarios, the minutes highlighted that RBA policymakers see “significant uncertainties” in the economic outlook. They stated that “trade tensions remained a material risk to the global growth outlook.”
Consumption Key Threat
The minutes also noted that the RBA had revised its domestic growth outlook lower due to “a modest downgrading of the outlook for household consumption and residential construction.” They added that:
“The outlook had also become more uncertain over the preceding few months.”
Indeed, the bank said that consumption was a “key uncertainty” in its policy outlook.
House Prices Pose Risk
Regarding house prices, the RBA signaled its concerns saying that” if prices were to fall much further” it could negatively impact GDP. Members will continue to “assess the outlook carefully.”
Inflation Still Low
On inflation, the minutes noted:
“Headline inflation had been lower than forecast, largely because fuel prices had been lower than expected in the quarter. Domestic cost pressures had been relatively subdued, partly because wages growth had remained low.”
In all, the minutes compounded to the dovish tone of the RBA meeting. The bottom line is that, due to the high level of uncertainty in domestic and global conditions, the bank can no longer be certain that the next move in rates will be an increase.
For now, AUDUSD remains stagnant at the lower end of the .7390s – .7020s range which has framed price action over recent weeks. The bearish trend line from last year’s highs remains the first key resistance with local structural resistance at .7237 just above. A break of this will be needed to signal a bullish shift. To the downside, a break of .7021 will be needed to signal a resumption of the bearish trend.