The Australian and New Zealand Dollars are trading mixed Tuesday ahead of the start of the U.S. Federal Reserve’s two-day policy meeting. Earlier in the session, the Reserve Bank of Australia released the minutes of its June 3 monetary policy meeting.
At the meeting, the RBA lowered its benchmark interest rate by 25 basis points to 1.25 percent for the first time in almost three years. At the time, the Board said it made this decision to support employment growth and provide greater confidence that inflation will be consistent with the medium-term target.
RBA Minutes Summary
Given the rate cut, the RBA minutes revealed no surprises with policymakers stating it’s “more than likely” they’ll have to ease further in the period ahead.
A summary of the minutes shows:
- Members judged that a decline in interest rates was unlikely to encourage a material pick-up in borrowing by households that would add to medium-term risks in the economy.
- Risks to the forecasts for growth and inflation in both directions.
- It was more likely than not that a further easing in monetary policy would be appropriate in the period ahead.
- Lower interest rates were not the only policy option available to assist in lowering the rate of unemployment
- In assessing whether further monetary easing was appropriate, developments in the labor market would be particularly important.
- In other news, the quarterly Home Price Index came in at -3.0%, worse than the -2.5% forecast.
New Zealand News
In New Zealand, Westpac Consumer Sentiment came in at 103.5, slightly lower than the previously reported 103.8.
“Today’s survey highlights that the New Zealand economy has slowed, and households are feeling it,” said Westpac’s Chief Economist Dominick Stephens. “Much of the economic growth that we have seen in recent years has actually been a result of strong population growth. However, on a per capita basis, economic growth has been slow.”
“Individual households are finding that they’re not getting much better off,” noted Mr. Stephens. “They are worried about their financial situation, and that nervousness has seen them rein back their spending.”
“While overall confidence is down, there are some notable differences across household groups. In particular, older New Zealanders are telling us that they are concerned about the economy’s direction, while younger New Zealanders are more upbeat,” commented Mr. Stephens. “In part these differences may be related to developments in the housing market. The slowdown in house price growth over the past year has been a concern for many existing homeowners. However, for many younger New Zealanders, those same developments mean that home ownership is now looking more affordable.”
We’re not expecting too much movement ahead of the Fed’s interest rate and monetary policy decisions on Wednesday. Both the AUD/USD and NZD/USD are expected to remain under pressure because the Reserve Bank of Australia and the Reserve Bank of New Zealand are expected to cut interest rates in the near future.
The Fed is not expected to cut rates in June, but its monetary policy statement should open the door for rate cuts in either July or September.
This article was originally posted on FX Empire
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