AUD/USD rose for the second week in a row last week, benefiting from a weaker dollar on weaker-than-expected US retail sales and stronger-than-expected US CPI and PPI data.
The AUD/USD rally came despite weaker-than-expected Australian jobs data, as the unemployment rate surged to a two-year high of 4.1%. Although the ABS suggested that this downturn is the result of seasonal changes, we believe it reinforces the underlying trend of a cooling labor market. Therefore, it is more likely that the RBA will cut rates in the second half of this year.
Key local economic events for AUD/USD this week are Tuesday’s RBA meeting minutes, previewed below, and Wednesday’s wages data, which is expected to rise 0.9% for the quarter and 4.1% annually.
What to expect from this week’s RBA meeting minutes (Tuesday, February 22, 11:30am)
The minutes of the Reserve Bank of Australia’s February meeting are scheduled to be published at 11.30am on Tuesday 22 February.
At its February board meeting, the RBA left the official cash rate unchanged at 4.35%, as expected by many. The RBA noted that rising interest rates were working to curb inflation and achieve a better balance between supply and demand.
“Rising interest rates work to establish a more sustainable balance between aggregate demand and supply in the economy.”
The RBA remains reliant on data and confirmed it maintains a weak tightening bias.
“The interest rate path that best ensures inflation returns to target within a reasonable period of time depends on evolving data and risk assessments, and the possibility of further rate increases cannot be ruled out.”
Minutes reveal what options the RBA Board considered at its February meeting, what factors would prompt the RBA to act on a tightening bias in 2024, and the likelihood that the bank would offer a more neutral bias Any clues about it will be closely scrutinized.
