Notes of today's statement by Glenn Stevens
- At its meeting today, the Board decided to leave the cash rate unchanged at 2.0 per cent.
- The global economy is expanding at a moderate pace, but some key commodity prices are much lower than a year ago.
- FED is expected to start increasing its policy rate later this year.
- Global financial conditions remain very accommodative.
- Global long-term yields remain remarkably low despite developments in China and Greece.
- In Australia, the available information suggests that the economy has continued to grow.
- Economic growth remains below trend amid stronger employment growth and steady unemployment.
- Overall, the economy is likely to be operating with a degree of spare capacity for some time yet.
- Domestic inflationary pressures have been contained and should remain the case for some Inflation forecast to remain consistent with the target over 1-2 years, even with a lower exchange rate. (In such circumstances, monetary policy needs to be accommodative).
- Low interest rates are acting to support borrowing, spending, equity prices and property.
- Credit is recording moderate growth overall.
- The Australian dollar is adjusting to the significant declines in key commodity prices.
- Leaving the cash rate unchanged was appropriate at this meeting.
- Further economic and financial information over the period (1 month) ahead will inform the Board's ongoing stance of policy.
The Australian Dollar spiked as it was announced rates were to remain on hold at a record low of 2%. The notes suggest the RBA are still deciding on a 'per meeting basis' and I have long advocated the assumption they are waiting for the FED to do the heavy lifting by raising their rates. As long as the markets expect a FED rate hike then I see no reason for RBA ro lower their cash rate. However if there is an expectation of rates remaining low in America until 2016 then expect a rate cut by RBA at the following meeting.
Friday produced a wide ranging Rikshaw Man Doji which penetrated the 0.725-0735 range on both sides, to warn of potential change in trend. A break above 0.7366 could see the Aussie rally towards 0.7417 or the bearish trendline form June's high.
Overall I expect to see the Aussie break to new lows but for now the near-term trend could favour further strength. Over the coming week/s if I see signs of weakness below key resistance levels then I'll be seeking bearish setups in line with the dominant bearish trend, on higher timeframes.