Tonight at 1:30 the first of numerous minutes from recent central bank meetings this week was published. Today's minutes published on November 19 was about the conversations at the last Reserve Bank of Australia (RBA) meeting in October.
Let us remind you that in October the RBA decided to keep the main interest rate at a record low of 0.75 percent after the previous three cuts from June. At that time, the statement says that in order to achieve full employment and the inflation target it is justified to wait for a longer period of low interest rates in Australia in the current economic conditions. The board added that further monitoring of the labor market is necessary and will be ready to further ease monetary policy, if needed, to support sustainable growth, full employment and achieve the inflation target.
The minutes published today has a quite dovish tone, and the phrase that the board agreed that the interest rate cut could be justified at the November meeting deserves special attention. It was also assessed that lower interest rates support the economy through lower exchange rates, higher asset prices and higher cash flow for borrowers, but also the negative impact of lower interest rates on savers was noticed.
In response to the publication of the dovish minutes, the Australian dollar began to depreciate. However, the decline was not lasting despite an increase in chances for interest rate cuts at the December RBA meeting. According to participants in this market, the chances of a further decline in the cost of credit increased to 29 percent after the publication of the minutes from 21 percent before. It may, therefore, be concluded that there are so few investors willing to sell further AUD that even under favorable conditions it could be difficult to further weaken the currency.
AUD/USD daily chart. Conotoxia trading platform
From the chart's point of view, the range of fluctuations decreases because the AUD/USD pair is still moving between a horizontal support and the downward trend line, which is considered as resistance. It seems that only the break of the described lines could bring a greater trend movement, which many investors may wait for, observing the current struggle of demand and supply in a triangle-like pattern.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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