The Reserve Bank of Australia’s board reaffirmed that it would not increase the cash rate target until progress is made towards full employment, inflation. Members noted that the downturn had not been as severe as earlier expected and recovery was underway in most of Australia.

The Keynotes of the Minutes of the Monetary Policy Meeting of the Reserve Bank Board are ‘The board agreed to maintain highly accommodative settings as long as required. Recovery was likely to be uneven, with the COVID-19 outbreak in Victoria having a major effect on the economy. Wage and price pressures remained subdued and this was likely to continue for some time.

The board will continue to consider how further monetary measures could support the recovery. The Australian banking system, with its strong capital and liquidity buffers, had remained resilient. Members noted that public sector balance sheets in Australia were strong, which allowed for the provision of continued support.

Government bond markets had been operating effectively, alongside a significant increase in issuance. Members considered it likely that fiscal and monetary support would be required for some time. Government bond markets had been operating effectively, alongside a significant increase in issuance. The bank stood ready to purchase ags and semi-government securities in the event of a recurrence of market dysfunction.

Demand for business loans had remained subdued, reflecting the weakness in economic conditions and the high level of uncertainty. Supply of credit had also tightened somewhat since earlier in the year, reflecting the uncertain economic outlook.’

The RBA’s upbeat comments on the economy overshadowed the 1.8%  quarter-on-quarter decline in Australia’s House Price Index in the second quarter. The markets were expecting a 1% decline following the first quarter’s 1.6% gain.

Australia’s export partner China showed a better Retail Sales and Industrial Production data Retail sales rose 0.5% in August from a year ago, the first positive report for the year so far, China’s National Bureau of Statistics said Tuesday. Notably, sales of communication equipment rose 25.1% from a year ago and that of autos rose 11.8%.

AUD/USD 4 Hour Chart:

Support: 0.7267 (S1), 0.7246 (S2), 0.7228 (S3).

Resistance:  0.7306 (R1), 0.7324 (R2), 0.7345 (R3).

Amid all the positive data and sentiment for Aussie, we expect a bullish trend for AUD/USD.