The Australian economy probably slowed down in the first quarter of 2017. We will get the data tomorrow, but the Reserve Bank of Australia already encounters the figures in its rate decision.
The RBA decided to leave the interest rate unchanged at 1.50% as widely expected. In the statement, the team led by Phillip Lowe acknowledged that GDP is probably low in March but that it is expected to recover later on.
As always, the Canberra-based institution says that a rise in the exchange rate could complicate the economic rebalancing. They see some risks in China’s high level of debt. Chinese debt was highlighted by Moody’s: the rating agency recently downgraded the credit rating of Australia’s No. 1 trading partner.
What about home prices? These are “rising briskly” according to the RBA, a similar line that was seen in previous decisions.
The jobs market remains mixed and they do point out slow wage growth, something that is unlikely to change too much. Household consumption is held back by the slow growth in wages.
Here is a quote from the statement:
The outlook continues to be supported by the low level of interest rates. The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment.
AUD/USD
The pair had already recovered from the 0.7375 level, almost reaching 0.75. However, just before the publication, we had a dip to 0.7460. After the announcement, the pair tackles the round 0.75 number one again.
Resistance awaits at 0.7610, a line that worked in both directions. Support below 0.7375 is at 0.7325.
More: AUD/USD: balance tilted to the downside [Video]
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