The Reserve Bank of Australia (RBA) just published the minutes from their last board meeting. The most dramatic on-the-record debate in the meeting was over interest rates. The board gravely debated a courageous optionality, a bold signal to cut 50 bps. Yet, they decided to go with a more cautious approach by reducing 25 bps. This decision was taken to ensure predictability within the economic environment, projecting a more conservative approach in the face of persisting economic headwinds.
Particularly in response to this news, the Australian dollar (AUD) floated lower. The AUD/USD pair dropped back to 0.6460, to suggest fading momentum following the Monday squeeze higher. Analysts noted that the RBA’s cautious outlook contributed to the currency’s decline, as market participants weighed the implications of the interest rate cut on the Australian economy.
Gold prices responded to the RBA’s larger rate hike and overall direction in market sentiment. After climbing to multi-week highs closer to $3,400, gold retreated, remaining firm above $3,350. Traders squared positions ahead of the month’s most important employment figures due later this week. This triggered a slight boost to risk sentiment and fresh bidding for the US dollar, sparking an intraday slide.
That should make for an interesting day when the next US Job Openings and Labor Turnover Survey (JOLTS) is released later today. At the same time, Australian GDP figures will hit the presses on Wednesday. In focus on Friday will be the Non-Farm Payrolls (NFP) report. This will lead to a new flurry of market activity as investors rework their plans based on soon-to-be released economic measures.
On currency markets, the GBP was under pressure as well. GBP/USD pair tested the 1.3500 level but stayed slightly below the level and came under small bearish pressure. Traders have been wary ahead of key economic data. This reluctance reflects a wider wave of uncertainty hitting all the world’s reserve currencies.