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No Surprise from RBA; China’s Service Sector Slowdown

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Today, during the Asian morning, the Reserve Bank of Australia announced that they are keeping their cash rate at +1.50%, marking the 31st month in a row when the rate is at the same level. China released its Caixin Services PMI figure for the month of February, which came out worse than expected.

Australia’s Cash Rate Remains Unchanged

Today, during the Asian morning, the Reserve Bank of Australia announced that they are keeping their cash rate at +1.50%, marking the 31st month in a row when the rate is at the same level. This was widely anticipated by analysts. According to the RBA statement released this morning, it says that even though the global economy had grown in the beginning of 2018, but the second half of it experienced a slide, which has dragged into 2019. That said, the outlook for of the Australian economy is still reasonable, but a few threats started to appear.

Of course, the US-China trade tensions are something that Australia is monitoring carefully, as this is damaging both China and the US. Given that China is an important trade partner of Australia, which buys a lot of its natural resources, any slowdown in the Chinese economy has a negative effect on the Australian economy. Also, another issue that RBA considered in its rate decision is a slight decrease in the headline inflation numbers across the globe, even though the core figure started picking up slowly.

The RBA also notes that the Australian labor market is doing good, at the moment. The last unemployment rate came out at 5%, which is considered to be a strong figure. Australia expects, that the number could drop a bit more in a few months’ time. This could be explained by the fact that certain areas of the continent are experiencing shortages in skilled workforce. Such conditions support the real wage, as it continues to grow slowly. Because the Australian inflation remains below the Bank’s target rate of 2%, this also helps the working class to enjoy their higher wages, for now.

AUD/CAD – Technical Outlook

AUD/CAD continues to trade below its short-term downside resistance line taken from the high of December 3rd, even though the pair has shown some resilience in the past couple of trading days. The rate is close to testing the above-mentioned downside line, but as long as that...

Read the full financial markets daily report on JFD Research.

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Source: https://www.jfdbrokers.com/en/research/no-surprise-from-rba-chinas-service-sector-slowdown
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