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RBA opts for lower exchange rates

Tuesday, May 19 2015
According to the RBA Meeting Minutes Board continued to see Australian dollar as too strong given economic conditions, thus repeating its previous view. Members noted that further depreciation of the exchange rate seemed to be both likely and necessary, particularly given the significant declines in key commodity prices, and that such an outcome would help to achieve more balanced growth in the economy and assist with the transition to a lower terms of trade. Furthermore, the strong Australian dollar and federal spending plans are the key variables in assessing the case for a further rate cut from a record low 2%. 
 
More broadly, members noted that the low levels of interest rates were helping to support demand in the face of a number of persistent headwinds and that a further reduction in the cash rate would provide some additional support to economic activity by reinforcing recent encouraging trends in household demand. In turn, this would support non-mining business investment insofar as demand conditions were the main factor constraining these decisions. Such outcomes would be expected ultimately to lead to stronger labour market conditions. 
 
Aussie fell after the Minutes were released, but found area around 0.7950 level to be supportive enough in order to rebound and currently being traded few points above 0.80 handle. Pair is likely to find support around 0.7950 and resistance above 0.8050 area. Later today, in the US session, Building Permits and Housing Starts figures are scheduled for a release.
More in this category: « When will BoE raise its interest rates? UK CPI fell to deflation area first time ever »

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