The Aussie dollar was riding higher this morning, trading at it strongest levels against the USD so far this month. But it seems traders have read the RBA September board minutes, released at 11.30am, as dovish, opening the door to another rate cut.
The RBA made it clear it expected the Q2 national accounts (released the day after the meeting) were going to be weak. To a certain extent it means that they won’t necessarily be recalibrating growth expectations, as some commentators suggested after the Q2 GDP printed a much weaker-than-expected 0.2% dragging the year-on-year rate down to 2%.
But elsewhere the minutes drip with caution.
And, it’s here forex traders seem to have found their inspiration to sell.
On Investment and Capital Expenditure the RBA said:
Recent data on investment intentions suggested that mining investment would continue to decline and non-mining business investment would remain subdued in the near term, despite survey measures of aggregate business conditions being above average. However, non-mining business investment was still expected to pick-up over time as a result of the depreciation of the exchange rate over the past year and a further gradual rise in household expenditure.
On housing, one of the engines of growth via construction and wealth effect of higher prices, the RBA said that low interest rates will “continue to support growth in dwelling investment and household consumption.” But they subtracted from this adding:
There were indications that the measures implemented by APRA had slowed the growth in lending for investment housing. Dwelling prices continued to rise strongly in Sydney, though trends had been more varied across other cities. The Bank was continuing to work with other regulators to assess and contain risks that may arise from the housing market.
In terms of employment the RBA was far from ebullient noting:
Forward-looking indicators of labour market conditions had been mixed; some were consistent with the unemployment rate remaining around current levels or even falling a little, while others pointed to a slight rise over coming months.
Elsewhere on jobs they added:
Although the demand for labour had improved, particularly in service sectors, members noted that spare capacity remained and wage pressures continued to be weak.
Of course the RBA noted that the Aussie dollar was doing its job and would continue to support growth. That’s something that is becoming more apparent as the week’s and months roll on.
But it seems forex traders are taking note of some subtle indications the RBA may still have the door ajar to further cuts.
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