Reserve Bank of Australia Cuts Rate To Its Lowest
The U.S. dollar lost momentum in Asian trades on Tuesday, while its Australian counterpart treaded on positive tracks after the Australian central bank cut interest rates.
During the G20 Summit, leaders of U.S. and China, the main partakers of the trade rivalry, met on the sidelines to negotiate. U.S. President Donald Trump and Chinese leader Xi Jinping both reached an agreement; to pause the imposing of additional tariffs on both countries’ imports.
Trump said that the deal needs to be “tilted to our advantage” to compromise with China’s trade surplus involving the U.S. for years.
Consequently, stocks went higher; although investors received news about weak manufacturing data later on, hurting sentiments. U.S. manufacturing activities fell to see its lowest level since 2016.
U.S. employment report data is set for disclosure on Friday. Nonfarm payrolls are projected to have risen 164,000 in June, bouncing back from the previous 75,000 in May.
The U.S. dollar index was 0.1% decreased to 96.352.
The AUD/USD pair rose 0.3% to 0.6982 after the Reserve Bank of Australia made history by cutting interest rates to 1%.
RBA Governor Philip Lowe said the purpose of the cut was to, in his words, “support employment growth” and establish “greater confidence” in the Australian economy.
“However, the uncertainty generated by the trade and technology disputes is affecting investment and means that the risks to the global economy are tilted to the downside. Today’s decision to lower the cash rate will help make further inroads into the spare capacity in the economy,” Lowe added.
“It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target.”
The USD/JPY pair slipped 0.1% to 108.32, while USD/CNY was higher to 6.8620 by 0.2%.
The New Zealand dollar was last seen trading at 66.77 cents against the greenback and 95.67 cents against the Aussie currency.
Australian Currency Resurgence
RBA governor Philip Lowe said the outlook for the global economy continues to be sensible.
He also said the RBA’s board would remain monitoring progress in the labor market closely and revise or adjust monetary policy “if needed.”
This move aims to support sustainable economic growth and over time, the achievement of the inflation target.
According to Imre Speizer, Westpac senior markets strategist, the “if needed” comment implies possible future interest cuts. He added that the market reaction to the RBA interest cut was a little soft because it was already widely expected.
The Australian economy grew at 1.8% over the year to March.
Australian consumption growth has been passive, negatively affected by a prolonged period of weak income growth and declining real estate prices.
RBA Lifts Asian Stocks
The Reserve Bank of Australia cutting its rates to the an all-time low allowed for Asian stocks to inch higher.
Stocks in China, which is Australia’s primary partner on trade imports and exports, were moving higher during the day.
The Shenzhen component gained 0.16% to 9,545.52, while the Shenzhen composite was 0.159% higher to 1619.12; although the Shanghai composite was just below the neutral zone at 3,043.94.
Over in Hong Kong, the Hang Seng index leaped 1.26%, a positive welcome into the trade sessions after a holiday.
The Nikkei 225 in Japan inched 0.11% higher to 21,754.27 at the end of the trading day. The Topix was up 0.31% to close at 1,589.84.
However, the Kospi, over in South Korea, slid 0.36% close at 2,122.02. Eyes are fixated on the Asian country for being on the other end of a tech-imports dispute with Japan.
The Australian S&P/ASX 200 was increased slightly ending its trading day at 6,653.20.
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