November started with RBA monetary policy meeting. While the Reserve Bank of Australia was moving forward with aggressive 50-basis point rate hike increments, in the November meeting, they lowered the tightening speed with only a 25-basis point rate hike. That can be read as a longer tightening cycle, albeit a less aggressive one. Considering that inflation surprised higher in the third quarter, it seems the RBA’s case is for price pressures to moderate ahead.
Slower but longer! RBA continues its contractionary policies
After the RBA meeting, we had some data from the Australian economy, let’s review some of them.
- AIG Manufacturing Index in October fell to 49.6.
- Building Approvals in September fell by -5.8%.
- Home Loans in October decreased by -9.3%.
- Trade Balance in September increased to 12.444B.
- Retail Sales in October increased by only 0.6%.
- Westpac Consumer Sentiment in November fell by -6.9%.
- NAB Business Confidence in October, fell to 0.0.
- The wage Price Index in Q3 increased by 1.0%.
- The unemployment rate in October eased to 3.4%.
Reviewing the data above telling us that inflation is still high and with increasing wages and an unemployment rate of 3.4%, can stay high, while the economic condition in other areas is not so good. In short, we can say that data likely did little to meaningfully alter the RBA rate path. Minutes from the RBA November monetary policy meeting showed that the central bank is prepared to either pause or return to larger rate hikes ‘if the economic data confirm the need.
We will likely know more information from the December interest rate announcement, until that, there is not much data that can support the Aussie, especially with weakening economic data from China. Also, we have to watch the market risk, as the Australian Dollar remains sensitive to how risk appetite may unfold heading into the next RBA and Fed meetings.
From the technical point of view, in the daily chart, as you can see in the below figure, bears are trying to pause, and move a bit higher, but counting on bulls under 0.700 is not logical.