RBA Keeps Policy Rate Steady

Pound to Australian Dollar: Forecast For the Rest of the Week

RBA Governor Philip Lowe said that the strength of the Australian dollar may further pressure consumer prices, therefore affecting outlook for growth and employment.

The higher exchange rate is likely to contribute to subdued price pressures in the economy.

The PMI data comes roughly 3 hours prior to the Reserve Bank of Australia's policy meeting.

With inflation figures appearing to be lower than expected and a bounce back in the Australian dollar, these factors might just be suggesting that it is still too early to hike interest rates in Australia.

Baseball Hall of Fame induction: Jeff Bagwell thanks Craig Biggio, Astros fans
Jeff Bagwell , who played his entire 15-year career for the Houston Astros , just wanted to be able to play pro baseball one day. For a little guy with not much speed, I truly appreciate that. "But I'm insanely glad that we have him to hang onto".

One bright spot for the economy is the prospect of recovery in business investment spending.

In his statement, Dr Lowe said that although retail sales had picked up recently, "slow growth in real wages and high levels of household debt are likely to constrain growth in spending".

"The Australian dollar has appreciated recently, partly reflecting a lower USA dollar".

Instead, he said, "the post-meeting statement reported that the forecasts were largely unchanged and that growth was still expected to pick up to around 3 per cent". The bank observed that it is also weighing on the outlook for output and employment.

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He said Dr Lowe's reference to higher commodity prices against the backdrop of expected weaker terms of trade also indicated the RBA was unconvinced a recent bounce in commodity prices was sustainable.

A strengthening exchange rate, Dr Lowe warned, "would be expected to result in a slower pick-up in economic activity and inflation than now forecast".

The governor noted jobs growth has been stronger over recent months and was expected to continue strengthening but said wages growth remains low and is expected to stay that way for some time.

The Australian Dollar extended its gains from Monday following better than expected Chinese Manufacturing PMI data from Caixin. Housing prices have been rising briskly in some markets, although there are some signs that these conditions are starting to ease.

Philander to remain in hospital overnight
Bavuma subsequently ensured South Africa avoided the follow-on by driving a Broad half-volley through the covers for four. Philander took two wickets on the first day of the ongoing third Test at The Oval in between bouts of a stomach bug.

Finally, CACIB notes that the USD's recent downtrend remains the key theme in the FX markets and price swings around the trend will remain the key source of FX volatility. While some economists might argue high iron ore and coal prices justify a stronger Aussie dollar, the reality is mining companies aren't going to use the windfalls to invest and hire Down Under. Rent increases remain low in most cities. Both CPI inflation and measures of underlying inflation are running at a little under 2 per cent. Inflation is expected to pick up gradually as the economy strengthens.

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