AUD/USD: Aussie unchanged as RBA outlines gloomy outlook
The Australian dollar was little changed against its US counterpart in Friday’s Asian session, as the AUDUSD continued to drift below 86.00 amid a gloomy outlook from the Reserve Bank of Australia.
The AUDUSD consolidated at 85.58, little changed from the previous close. Support is likely found at 0.8535 and resistance at 0.8611. The US dollar continues to be the favourite across the board, with recent economic data reaffirming the view the Federal Reserve will consider lifting interest rates sooner than previously assumed.
Despite falling nearly 10 percent over the past 12 months, the Australian dollar is still considered high by historical standards. An overvalued local currency was cited as a major risk factor for Australia in the RBA’s latest quarterly monetary policy statement, which was released Friday.
The Australian dollar “remains high by historical standards and, in trade-weighted terms, is above the level seen earlier in the year despite the sizable declines in key commodity prices over the course of this year,” the 68-page document read.
A higher local currency, it is feared, could hinder Australian competitiveness, especially in the areas of tourism, natural resources and education.
The document also cited China’s property market and a weaker jobs recovery as other potential risk factors that could weigh on the economy.
“A key risk is the condition of the Chinese property market, which has been a source of uncertainty for some time,” the quarterly report also said. The RBA noted that, while Chinese authorities have taken action to support the property market, the jury is still
out on whether it can avoid a prolonged slump.
Regarding jobs, “Conditions in the labour market remain subdued,” the report said, but forward-looking indicators suggest moderate employment growth in the near future. Employment in Australia has grown by only 1 percent over year-ago levels.
Australian employers added 24,100 payrolls in October, all in full-time work, the government statistics bureau reported Thursday.
The unemployment rate edged up 0.1 percentage points to 6.2 percent as more people entered the workforce.
The RBA’s outlook on domestic growth remained unchanged from the August statement. Economic growth is expected to be below trend until the middle of next year. The economy is expected to gather steam in 2016 to grow above trend, the report added. GDP growth is expected to average 2.5 percent this year, rising to 2.5 percent to 3.5 percent next year. Growth is expected to average 2.75 percent to 4.25 percent in 2016.
The RBA left its cash rate unchanged Tuesday, as expected by the consensus. October marked the fifteenth consecutive month the RBA kept its rate target at an all-time low of 2.5 percent. Interest rates are expected to remain at rock bottom until at least the middle of next year. Twelve of 14 economists recently polled by the Australian Associated Press said they believe there will be a rate hike sometime next year.
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