Philip Lowe, the Governor of the Reserve Bank of Australia, had a critical speech yesterday in which he talked in details about the state of the global economy and also provided an all-inclusive update on the economic conditions in Australia. He started his statement by apprising the most prevailing risks to global growth and cautioning against the worsened situation recently.
“The main message on the global economy is that while it is still growing reasonably well, the risks are increasingly tilted to the downside. The main source of these downside risks is geopolitical developments in many parts of the world. These developments are creating considerable uncertainty and this uncertainty is causing businesses to reconsider their spending plans. This is making the international environment more challenging for us.” [source]
Mr Lowe is yet another prominent economist to warn against the long-term threats to global growth and urged for a quick resolution to the issues. Meanwhile, at a UN climate conference in New York, which took place mere hours after Mr Lowe's speech, Donald Trump took the podium to criticize China and accuse the country once more of currency manipulation, which is the most recent episode in the ongoing trade war.
Philip Lowe’s speech was not all gloomy, however, as he asserted the projections of the RBA regarding long-term growth in Australia. He implied that the Australian economy is growing even now, albeit at a moderate pace which makes progress difficult to register, given the volatile international situation. He also added that:
“[…] after having been through a soft patch, a gentle turning point has been reached. While we are not expecting a return to strong economic growth in the near term, we are expecting growth to pick up. Against this backdrop, the main source of domestic uncertainty continues to be the strength of household spending.”
Be that as it may, the market did not react with overwhelming enthusiasm to MR Lowe's remarks, and the AUDUSD appreciated only slightly with 0.42 per cent during Tuesday's trading session before tumbling with 0.73 per cent the day after. On Wednesday the pair tested the lower-boundary of the range that was established in early August and is currently trading at 0.67480.
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