We said it wouldn’t take much to knock the Aussie Dollar down through some key technical support and the RBA Minutes released overnight were read closely for an excuse to do just this.
Even though the new forward-looking Quarterly Statement of Monetary Policy effectively makes these Minutes redundant, they were the highlight of an otherwise quiet Asia session. The RBA said, “retail sales had been weak in the September quarter, which was expected to translate into lower quarterly consumption growth than in the June quarter.
Members noted that the outlook for consumption growth depended on the outlook for household income growth, which remained uncertain. They discussed the possibility that households might change their consumption and saving decisions if the period of low income growth persisted”.
For interest rate and FX markets, they key phrase in the Minutes was, “there was considerable uncertainty around when and how quickly wage pressures might emerge and about how much these would add to inflationary pressure. In particular, they noted that, among other factors, pressure on margins from strong competition and a faster-than-expected pick-up in productivity growth could delay the pass-through of tighter labour market conditions to inflationary pressure.”
The AUD fell from USD0.7557 to 0.7533 overnight and opens in London this morning around 0.7545; some 20-25 pips lower than Monday. Against the Pound, GBP/AUD hasn’t quite made it to the May 9th high of GBP/AUD1.7620 and opens at 1.7555.