According to a survey by the National Bank of Australia, business conditions and confidence in business circles in Australia in July worsened amid growing uncertainty over the long-term prospects for the Australian economy. Thus, the index of business conditions fell in July to 8 from 11 in June, the confidence index of business confidence fell to 4 to 5 June.
In the last week the RBA cut interest rates to a level of 1.5%. In follow-up comments said that core inflation will be below the target level of 2% -3% at the end of 2018, in the range of 1.5% -2.5%. According to the RBA, slow wage growth, the existence of untapped resources in the labor market and the fall in the cost of rent will restrain inflation over the coming years.
The Australian dollar is probably one of the few currencies that hold ground against the US dollar on the currency market. At the beginning of today's trading day the pair AUD / USD almost reached the peak in July near the 0.7675 mark. The growth of the Australian dollar in the market seems to have been triggered by rising oil prices, commodity prices and the growth of the Asian and European shares.
Thus, the sovereign credit rating of South Korea has been raised the day before with the 'AA-' to 'AA', which helped to grow the Asian currencies before the beginning of the current session. It also supported the Australian dollar.
Although short-term trends in the economy remain favorable, long-term risks to the Australian economy are increasing, and it is likely to force the Reserve Bank of Australia has twice this year to lower the interest rate.
The next meeting of the RBA on the matter will take place on 6 September. Later on September 21 Federal Reserve decides on interest rates in the United States. The probability of a rate hike in the United States on the eve of the first debate between the candidates for the US presidency, Hillary Clinton, and Donald Trump, scheduled for September 26, and after the weak GDP data for the 2nd quarter, despite strong US labor market performance in July, stands at 15%.
However, markets expect an increase in the US rate at 0.25% at the end of the year.
Given the different focus of monetary policies in the US and Australia, most likely decrease pair AUD / USD in the medium term.