RBA stays put on monetary policy

September 7, 2016

Aussie surged on Tuesday after Reserve Bank of Australia decided to leave interest rate unchanged at a historically low level of 1.5%, leaving the door open for further easing. RBA decision did not come as a surprise for markets as the policymakers are trying to gauge the effect of lowering rates in May and August, which have yet to impact the economy.

According to the comment of RBA head Glenn Stevens, the board of directors decided to stay put on cutting rates as it squares with stable economic growth and steady inflation targets. The governor is going to leave office in September after being at the wheel of the bank for ten years. All 33 of the economists surveyed by Reuters projected no change in RBA monetary policy while financial markets priced in a very slim opportunity of the rate cut.ВВ RBA decision accelerated the intraday growth of Aussie against Dollar which rose 0.9% to 0.7640 level.

German manufacturing sector showed signs of decline in factory orders dropping 0.7% vs. a projected 0.2%. The Euro gained 0.14% against the greenback to 1.1164 level. GBP/USD rose 0.3% to 1.3342, holding gains after positive service PMI report, released yesterday.

Crude oil benchmarks posted mixed performance with US Oil rising 1.04%, and Brent erasing Monday gains asВВ joint-statement of Saudi Arabia and Russia made at the G20 Summit contained no clues on output freeze. Saudi Oil Minister KhalidВВ  Al-Falih said there is no need to kerb production right now.

Gold extended gains on Tuesday as investors are trying to adjust positions ahead of US ISM Non-Manufacturing Composite which is supposed to stir up increased volatility on the greenback. December Gold futures rose 0.46% to 1,332.75, while futures on US Dollar lost 0.11% to 95.63 level.

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