(17 September 2019) DAILY MARKET BRIEF 2：Dovish Minutes weigh on AUD
It seems to be a rather Dovish bias communicated by the Reserve Bank of Australia in its minutes of the meeting of 3 September
2019. Although it decided not to further reduce its Cash rate in September after easing already two times this year in June and July, it
appears that the RBA move came unsurprisingly, as the RBA waits for the Fed tomorrow before moving its toes. Financial markets are now
anticipating an additional rate cut by year-end of 0.25 percentage point, which is in line with expectations for the Fed. Following the
announcement, the Aussie has been dragging down somewhat against G10 peers.
The RBA easing tone has not fundamentally changed from August Board Minutes, as it continues to favor further easing if required to
support growth and achieve inflation target of 2% - 3%. While policy makers consider the US – China trade spat to remain a major drawdown to
global growth, downside risks stay domestically due to stagnant wage growth and weak domestic consumption stimulus, despite PM Scott
Morrison tax cut validated in July 2019. Ultimately, the question arises whether the housing market is not at risk in spite of household debt
and mortgage approvals at historical high and multi-year high respectively, in addition to stalling wage growth. Accordingly, attention
will now turn to Thursday's release of August's labor data and in particular the unemployment rate gauge that should be unchanged at 5.20%, a
market that the RBA expects to remain robust looking forward.
In that respect, AUD/USD currently trading at 0.6835, a 7-day low, is likely to stay flat short-term, approaching 0.6830.
By Vincent Mivelaz
