RBA Interest Rate Decision (February 2019)


Posted on: 2019-02-04 (Day) By BCR Market Event


 

Is Aussie Ready For The Bounce?

 

The Reserve Bank of Australia kept the interest rate at a record low of 1.5% as expected in December’s meeting.  It is the longest policy pause in the reserve bank’s history. According to the economists’ forecast, the stance of monetary policy likely to be held in February’s meeting. However, Governor Phillip Lowe has hinted that the next move will more likely be to the upside, but an increase is not imminent. The GDP growth and inflation may serve as a hint for the next move.

Australian Interest Rate (%)

 

 

BoE Interest Rate Announcement History

Date                                      Previous              Consensus          Actual

05 Feb 2019                        1.5%                     1.5%     

04 Dec 2018                        1.5%                     1.5%                    1.5%

06 Nov 2018                        1.5%                     1.5%                    1.5%     

02 Oct 2018                         1.5%                     1.5%                    1.5%

04 Sep 2018                        1.5%                     1.5%                     1.5%

07 Aug 2018                        1.5%                     1.5%                    1.5%

03 Jul 2018                          1.5%                    1.5%                      1.5%

05 Jun 2018                         1.5%                    1.5%                     1.5%

01 May 2018                       1.5%                     1.5%                     1.5%

03 Apr 2018                        1.5%                     1.5%                     1.5%

 

 

Opportunities can be found in the statement

 

Inflation Rate

“Inflation remains low and stable. Over the past year, CPI inflation was 1.9 per cent and in underlying terms inflation was 1¾ per cent. Inflation is expected to pick up over the next couple of years, with the pick-up likely to be gradual. The central scenario is for inflation to be 2¼ per cent in 2019 and a bit higher in the following year.” Referring to RBA’s Statement on Monetary Policy – December 2018.

A better-than-expected annual inflation rate is showing a reading of 1.8% (YoY) in the last quarter of 2018. Slightly eased from last reading of 1.9%. It was the lowest inflation rate since Q3 in 2017, mainly due to a slowdown in the cost of transport. However, further progress in having inflation return to target is expected, although this progress is likely to be gradual.

Australian Inflation Rate (%)

 

GDP

 “The Australian economy is performing well. The central scenario is for GDP growth to average around 3½ per cent over this year and next, before slowing in 2020 due to slower growth in exports of resources. Business conditions are positive and non-mining business investment is expected to increase. Higher levels of public infrastructure investment are also supporting the economy, as is growth in resource exports. One continuing source of uncertainty is the outlook for household consumption. Growth in household income remains low, debt levels are high and some asset prices have declined. The drought has led to difficult conditions in parts of the farm sector.” Referring to RBA’s Statement on Monetary Policy – December 2018.

The GDP (YoY) in Australia expanded 2.8% in the Q3 of 2018, this is the weakest annual pace of expansion since last quarter in 2017. Uncertainties remaining from external global economies. In response to the international trade policy of the US, the economic outlook of households, businesses and financial markets will be influenced significantly.

Australian Annual GDP Growth Rate (%)

 

Unemployment Rate

The outlook for the labour market remains positive. The unemployment rate is 5 per cent, the lowest in six years. With the economy expected to continue to grow above trend, a further reduction in the unemployment rate is likely. The vacancy rate is high and there are reports of skills shortages in some areas. The stronger labour market has led to some pick-up in wages growth, which is a welcome development. The improvement in the economy should see some further lift in wages growth over time, although this is still expected to be a gradual process.” Referring to RBA’s Statement on Monetary Policy – December 2018.

The Unemployment rate fell to 5% in December 2018, beating the market expectation of 5.1%. It is the lowest among 6 years. A further gradual decline of unemployment rate is expected over the next couple of years. Wages growth increased and likely to drift upwards. Also, it is expected to grow gradually in the foreseen future.

Australian Unemployment Rate (%)

 

Technical View

The Aussie bounced against the greenback from 0.6731 on the first trading day of 2019, which is the lowest level since 2009. The pair is continuing its bullish stance since then. A bullish candlestick is showing in the monthly chart. In the daily timeframe, indicators are gaining bullish momentum for both MACD and RSI. The pair is moving above the MA system. Currently, the price has broken through 0.7235 resistance level. It is a strong sign for the pair to point North. Focus on 0.7393 barrier in for further movement. Also, keep eyes on Tuesday’s rate decision meeting.

AUDUSD D1 Chart