Last Week Market Recap
Monday 24th July 2017
Continued its rally last week as the RBA released its minutes for the July 4th meeting, while the Greenback was pressured by the second failure of the Trump administration in repealing Obamacare and passing a new healthcare bill. The week began with the rate declining on Monday despite a lower than expected U.S. manufacturing number. The pair then rallied sharply on Tuesday after the RBA’s Monetary Policy Meeting Minutes noted that, “Members discussed the Bank’s work estimating the neutral real interest rate for Australia. The various estimates suggested that the rate had been broadly stable until around 2007, but had since fallen by around 150 basis points to around 1 per cent. This equated to a neutral nominal cash rate of around 3½ per cent, given that medium-term inflation expectations were well anchored around 2½ per cent, although there is significant uncertainty around this estimate.” On Wednesday, the rate extended its gains despite better than expected U.S. housing data. Thursday saw the pair make its weekly high of 0.7988 before retreating after Australian Employment Change showed +14.0K new jobs in June compared to an expectation of +14.5K, while the Australian Unemployment Rate held steady at 5.6%. The pair continued its selloff on Friday after comments from RBA Assistant Governor Debelle, referring to the RBA minutes said that, “No significance should be read into the fact the neutral rate was discussed at this particular meeting,” adding that, “While an easier monetary policy elsewhere in the world should lead to faster growth in the world economy, which is good for the Australian economy, an appreciating exchange rate works against this.” AUD/USD closed at 0.7911, with a gain of +1.1% for the week.