RBA Minutes: More Confident Over Job Market, Less Action Against Rising Aussie

RBA Minutes: More Confident Over Job Market, Less Action Against Rising Aussie”

Despite uncertainty about how hawkish the Bank of England (BoE) will become in the coming months, the GBP AUD exchange rate has seen limited losses due to Reserve Bank of Australia (RBA) caution. By attributing the appreciation of the Australian dollar to USD's weakness, it appears less likely that RBA would take actions to curb its strength.

AUD EUR began the week trending near 0.6702. After briefly hitting a three-week-low of 0.6654 on Tuesday, the pair recovered and trended nearer the week's opening levels. Anxiety in US Dollar (USD) trade has led to stronger demand for risk-correlated currencies, like the Australian Dollar.

The minutes, released on Tuesday, also indicate the bank remained concerned about the impact any rate hike might have on the Aussie dollar, which has risen strongly against the United States greenback in recent months and slowed economic growth and inflation.

If further signs point towards weaker underlying fundamentals then markets are likely to discount the likelihood of the RBA maintaining its more optimistic view of the domestic economy.

Still, some analysts believe the RBA isn't far away from taking a more hawkish tone. The ANZ also believes the Australian Dollar has further to climb.

The Australian dollar struggled at the key barrier of 80 USA cents on Tuesday as investors hedged against the risk of a hawkish Federal Reserve, while the New Zealand dollar held steady ahead of a closely-watched dairy auction.

If the global interest rate is rising, it would appear that Australia might have to make some moves.

As a result the Australian Dollar remains vulnerable to downside bias in the near term.

GBP/AID Forecast: Could the RBA be Unexpectedly Hawkish?

"The appreciation of the Australian dollar over recent months, driven in part by a broad depreciation of the U.S. dollar, was weighing on domestic growth and contributing to subdued inflationary pressure".

'While the Index only gives us a glimpse of the likely momentum in the first few months of 2018 it now seems to be more consistent with our view of the likely growth environment next year than the Reserve Bank's forecast for growth comfortably above trend'.

ZEW's German economic sentiment and current conditions surveys for September beat expectations on Tuesday, while Germany's August PPI figures beat forecasts on Wednesday.

Australia's economic calendar will be relatively quiet for the rest of September, leaving the currency to react to risk-sentiment and the strength of its rivals.

The Australian Dollar has gained more than 10% on the greenback during the year to date, as the economy gathered momentum, the Dollar weakened and traders turned their attention back toward the future path of Australian interest rates.

The Australian dollar has fallen since the release of the RBA minutes, from 79.87 USA cents just prior to their publication to 79.70 U.S. cents at 1320 AEST.

Thursday will also see the publication of the Reserve Bank of Australia's (RBA) latest bulletin, which could influence "Aussie" movement too.

Otherwise, AUD EUR traders will be looking ahead to Friday's session when key Eurozone ecostats will come in.

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