Aussie Jumps After RBA Leaves Interest Rates Unchanged


The Australian dollar jumped today after the Reserve Bank of Australia (RBA) released the interest rates decision. As expected, the bank left interest rates unchanged and indicated that the current expansionary policies will continue for a considerable period. In the statement, governor Lowe said:
‘The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. ‘
In the past month, Australia released mixed data. The employment numbers released on 16th August missed analysts forecasts. In July, the economy lost 3.9K jobs, which was lower than the expected 15K. The participation rate rose by 65.5%, which was lower than the expected 65.7% while the unemployment rate decreased to 5.3%. In today’s statement, the bank said:
‘The outlook for the labour market remains positive. The unemployment rate has fallen to 5.3 per cent, the lowest level in almost six years. The vacancy rate is high and there are reports of skills shortages in some areas. A further gradual decline in the unemployment rate is expected over the next couple of years to around 5 per cent. Wages growth remains low, although it has picked up a little recently. The improvement in the economy should see some further lift in wages growth over time, although this is likely to be a gradual process.’
Last week, the country released disappointing housing numbers. The building approvals contracted by 5.2% in July, which was bigger than the expected 2.5% contraction. The building capital expenditure declined by 3.9%, which was worse than the expected 0.5% gain. Investments in plants and machinery too contracted by 0.9%, which was worse than the expected 1.0% gain while the private new capital expenditure contracted by 2.5%.
Yesterday, we continued to receive disappointing data from the country. Retail sales, which are a good measure of inflation remained flat. Traders expected a 0.3% gain. On a positive note, yesterday’s data showed that business inventories were up by 0.6% while the gross operating profits for the second quarter was at 2.0%, which was better than the expected 1.4% gain.
In today’s statement, the RBA said that it believed that the economy would grow by 3.0% in 2018. It based this on the above average rate of growth in the first half of the year. They also expect the growth to continue growing in 2019 and then start easing in 2020. On inflation, the bank said that the rate of inflation was at 2%. Nonetheless, it expects the rate to be slightly lower by the year end.
Australia has faced a challenging period this year as a prolonged drought has affected a large part of the economy. In addition to the drought, the country has been affected by the ongoing trade issues. On political scene, the country’s political environment has been challenging. Just last week, it got its sixth prime minister in less than ten years.
In the past few days, the Australian dollar has fallen from 0.7360 to a low of 0.7170. Today, it jumped slightly and has reached 0.7233.
The post Aussie Jumps After RBA Leaves Interest Rates Unchanged appeared first on Forex.Info.

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