Melbourne, Australia. Image source: ymgerman © 123RF.com
Earlier today, the Governing Board of the Reserve Bank of Australia released its latest Meeting Minutes. As per the consensus forecasts, the Board decided to maintain the underlying interest rate unchanged at 0.25 per cent.
The move is dictated by the determination of the Board to support 'full employment' and inflation 'sustainably within the 2-3 per cent target band'.
Overall, the tone of the monetary policy statement is optimistic with members of the Board weighing in on the faster-than-expected recovery in Australia. Even still, they acknowledged the persisting uncertainty, which continues to pose a significant threat to the global financial markets.
Among other things, the statement acknowledged the fact that the future of the recovery process would depend vastly on the way the epidemic is handled from here on out.
These remarks came just hours after it was announced that Melbourne, the second-largest city in Australia, would be put on another 6-week lockdown. The restrictive measurements are reimposed in a bid to curtail the resurgence of infections after 192 newly confirmed cases were reported yesterday.
"Leading indicators have generally picked up recently, suggesting the worst of the global economic contraction has now passed. Despite this, the outlook remains uncertain and the recovery is expected to be bumpy and will depend upon containment of the coronavirus. […] uncertainty about the health situation and the future strength of the economy is making many households and businesses cautious, and this is affecting consumption and investment plans."
Today's developments in Melbourne have shown that Australia's previous efforts to contain the virus are paying off, but there is still a lot of work that needs to be done.
The renewed lockdown could impede the overall positive outlooks of investors, policymakers and the general public, which, in turn, could thwart the aforementioned recovery process.
Moreover, consumption and investing are also left vulnerable to the possibility of reinstated containment measures.
That is why the Australian dollar depreciated in the hours following the release of RBA's monetary policy decision.
As per our projections from yesterday, the AUDNZD pair started falling, and it is currently testing the first steppingstone in the development of a new downtrend – the minor support level at 1.06140.
As can be seen on the hourly chart below, the underlying momentum in the market remains ostensibly bearish.
AUDNZD 1H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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