The minutes of the RBA December meeting published during the Asian session put pressure on the Australian dollar. Details of the central bank's final meeting this year were not as encouraging as it seemed. Let me remind you that the aussie strengthened by more than a hundred points at the end of this meeting, developing large-scale corrective growth. However, sellers seized the initiative this week: a negative economic forecast from the Australian government was published on Monday, and today the dovish minutes of the last RBA meeting. On Thursday, December 19, another release is expected, which may put additional pressure on AUD/USD - we will find out data on the growth of the Australian labor market. If all fundamental factors converge against the Australian dollar, then the pair may soon return to the framework of the 67th figure.
Let me remind you that the December meeting of the Reserve Bank of Australia took place just a day before the publication of key data on the country's economic growth during the third quarter. According to this release, GDP fell to 0.4% (compared with the second quarter), while the general forecast was at 0.5%. In annual terms, the country's economy slowed to 1.7%. Australia's GDP has been declining since the middle of last year, largely due to lower consumer spending. For example, in the third quarter, expenses increased by 0.1% - this is the weakest result since 2008.
Published Australian GDP growth data reinforced concerns that the regulator will resort to another round of rate cuts at the beginning of next year. The minutes of the December meeting only reinforced these expectations. The published document was clearly dovish. Although the RBA members agreed to pause until the beginning of next year, they made it clear enough that the cycle of easing monetary policy was not yet completed. The central bank took a break to assess the effectiveness of the measures already taken. A triple rate cut had an impact on Australia's housing market, and this fact required additional consideration. But in general, judging by the minutes, the RBA members are ready to further soften the parameters of monetary policy.
It is noteworthy that central bank officials focused on the labor market: they announced that they would closely monitor the dynamics of relevant indicators, including in the context of determining the future prospects of monetary policy. Let me remind you that the previous release was devastating for the Australian dollar. The unemployment rate unexpectedly rose to 5.3% (against the forecast of 5.2%), and the employment rate collapsed into the negative area. Moreover, this indicator has updated three-year lows - the number of employees suddenly decreased by 19 thousand. The negative dynamics in October was demonstrated by both the component of full employment and the component of part-time employment.
As I noted above, labor market data for November will be published this Thursday. In the light of the RBA minutes published today, this release will be of particular importance for the AUD/USD pair. The consensus forecast looks contradictory. The unemployment rate should remain at the October level (that is, at around 5.3%), while the number of employees can grow by 15 thousand. It is important that this increase be due to full (rather than partial) employment, as regular positions require higher salaries and contribute to higher consumer spending.
Thus, the minutes of the last RBA meeting this year reflected the willingness of its members to further reduce the interest rate - even without taking into account the deceleration of the country's GDP growth in the third quarter (since the data were published the day after the meeting). I believe that if the RBA members operated on these numbers, then the tonality of the minutes would be even more dovish.
The government of Australia added fuel to the fire, as it lowered forecasts of a budget surplus for the current and next financial years. On Monday, a semi-annual economic forecast was published, according to which the country's GDP growth for the current financial year was revised from 2.75% to 2.25%. Among the main reasons are the negative consequences of a trade conflict between the United States and China. With regard to unemployment, this figure, according to cabinet ministers, will amount to 5.3% next year, while inflation will remain in the region of the two percent mark. At the same time, the forecast for wage growth was reduced from 2.75% to 2.5%.
Summing up, it should be noted that the Australian dollar is declining not only because of the soft position of the Australian central bank. The external fundamental background also puts pressure on the aussie. Washington and Beijing have entered into an interim agreement, but barrage tariff barriers continue to operate, adversely affecting the global economy. At the same time, the second phase of the negotiation process promises to be more difficult than the first, given the list of unresolved issues. Against this background, weak macroeconomic statistics will actively pull down the AUD/USD pair, at least to the first support level of 0.6820 - this is the middle line of the Bollinger Bands indicator on the daily chart.
The material has been provided by InstaForex Company - www.instaforex.com