Forex: AUD/USD edging higher after RBA minutes

on Sep 17, 2013

**, Tuesday, September 17th:**

Minutes from the September meeting of Reserve Bank of Australia released today indicated a weakening labour market. The central bank said that consumer confidence has picked up, yet consumption has been progressing at a level below average. The RBA stressed that mining investment ‘’was expected to decline over the course of the next few years’’ and this has restrained businesses to take on new risks with the economy adjusting itself to a new environment following the commodities-driven boom.

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According to the detailed record of the September Board meeting, ‘’the outlook for inflation provided the scope to ease monetary policy further.’’ The RBA underlined that additional exchange rate depreciation would help the economic recovery. Policymakers agreed not to rule out a possibility to cut rates further but did not signal an imminent intention to reduce them.

Westpac analysts warn that if the AUD/USD goes ’’beyond the 0.94 handle however, the threat of further RBA rate cuts will rise, with our base case a Nov(ember) easing, currently only 35 percent priced in.” The research team of the second largest Australian bank retain their view that the currency pair would fall over the next three months. They opine that AUD/USD may stretch to 0.9415 and a further extension of the latest uptrend to 0.95 requires ‘’a notably dovish FOMC.’’

The AUD/USD rebounded from its intraweek low of 0.9286 after the RBA minutes were released, yet it still remains up 0.02 percent for the day at 0.9320.
In the US, Core CPI for August m/m is scheduled for release at 13.30 BST, with forecasts of a rise of 0.1 percent compared to a 0.2 percent increase in July. The headline change of consumer prices is expected to show a rise of 0.2 percent, identical to the prior period.


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