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Markets digest RBA minutes

Published November 20, 2019

Author – Rhys Miles

 

The release of the RBA’s minutes yesterday spooked the market revealing how close they came to cutting rates on Melbourne Cup day. They revealed that “a case could be made” to take official rates to 0.50% but are prepared to wait for the effect of earlier cuts, income tax reductions and the improving global economy. The RBA also acknowledged that a further reduction in interest rates may have a different effect on confidence than when interest rates were at higher levels. Wages data and the worsening jobs numbers were also highlighted as a concern with the markets factoring in a higher likelihood of a rate cut in February than they were just recently.

The AUD fell by 35 points straight after the release of yesterday’s minutes to the high 0.6700’s but has recovered most of that overnight after Trump declared that he discussed a “too strong dollar and Fed rate” with US Fed chair Powell in their recent meeting.

Some poor results and downwardly revised forecasts from Kohls and Home depot in the US took a bit of the shine off the Dow’s recent rally with the Dow finishing down around 0.36%.

With interest around the US/China trade discussions reaching fatigue levels a slightly positive tone emerged last night with suggestions that they are both bench-marking a possible roll back of tariffs against the terms of an agreement from May.

The next lot of potential market moving data will be tomorrow morning our time with the release of the US Fed minutes from their last meeting.