The Reserve Bank of Australia left its monetary policy unchanged with the interest rate at 2%. Also the text regarding the Australian dollar remained basically unchanged: they see AUD adjusting to lower commodity prices.
AUD/USD continues hugging the low levels of 0.71.
In the accompanying comments, the RBA noted the weakening in China but also stronger US growth. They are still worried about house prices in Sydney.
Previous change of tone
In the previous meeting back in August, there was a significant change: the RBA acknowledged the fall in AUD and did not really ask for more. In the past, they said that the A$ is overvalued.
Since that meeting in August, AUD/USD fell a lot more, mostly alongside the fall in the Chinese yuan and the Chinese stock markets.
The hypothetical question is: would they change their wording had the AUD been stronger? In any case, they seem comfortable with the big fall and perhaps wouldn’t even mind AUD/USD to reach 0.68, as some analysts foresee.
Other data
Earlier, Australia reported a solid rise in building approvals: 4.2% instead of 2.9% predicted. This also came with an upwards revision of the previous figure. However, Australia’s current account deficit came out worse than estimations with 19 billion and not ~16 billion. And here, it came on top of a downwards revised previous number.
In China, the official manufacturing PMI came out at 49.7, within expectations. Some good news came from the Caixin number, which was revised to the upside to 47.3 points in August. The original publication hit Chinese stock markets quite hard in mid August.
AUD/USD
AUD/USD remained depressed at 0.71. While the pair doesn’t challenge the lows, it also refrains from recovering.
The big number below is 0.70. The pair’s YTD low was 0.7035, but that was a swing move during the flash crash. A more significant number is 0.7070. On the upside we have 0.72 as resistance.
Here is the chart:
In our latest podcast we explain what’s going on with EUR and China before previewing the big events ahead:
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