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Analysts at Westpac, point out that in Australia, last week we saw the RBA minutes of their July meeting which emphasised that policy remains firmly on hold, although they did contain a detailed discussion of household debt dynamics.  

Key Quotes

“Again, the RBA said the next move “would more likely be an increase than a decrease”, although they re-introduced the notion that a stable cash rate would be a source of stability and confidence.”

“However the key data release last week was very strong employment data for the month of June. Australian employment increased by 51k in June, well above expectations, with full time jobs contributing most of the gains.”

“Although the unemployment rate held at 5.4% as the participation rate rose as workers were pulled into the workforce. This responsiveness of labour supply does show why wages have been slow to respond to this employment strength.   And while a strong result, momentum is still slowing from the peak in employment growth seen in 2017.”

“This week brings a number of important events globally and locally. On the international front we see US Q2 GDP which is shaping up as a cracker given current consensus forecasts of 4%. We also see Flash PMIs on Tuesday, as well as the ECB on Thursday who at their last meeting emphasised a commitment to keep rates steady until at least summer of 2019.”

“Domestically, the highlight will be June’s CPI print. Our economics team is expecting another benign print, and it is worth noting that for the last 18 months consensus forecasts have overestimated inflation outcomes and inflation remains far from threatening the RBA outlook.”

“The potential for further tweets from Trump, heightened risks around trade wars and thin liquidity conditions given northern hemisphere summer holidays all adds to the near term uncertainty for FX markets. However, if the Yuan continues stabilising below 6.80, the AUD should remain close to 74c.”