From the Bank of Tokyo Mitsubishi after the RBA
The Australian dollar has been the best performing currency in the Asian trading session following last night RBA policy meeting. The RBA left their policy rate unchanged as expected and more importantly left the final paragraph of their accompanying statement unchanged as well maintaining a neutral bias. The statement acknowledged that China's economy has steadied, employment growth has slowed, and house prices were described as having risen briskly in some markets. The RBA signalled that their outlook for the economy was largely unchanged still expecting it to grow at close to its potential rate over the next year before gradually strengthening. Inflation is expected to pick up gradually over the next two years from the current "quite low" rate.
The November statement released on Friday will reveal the latest RBA forecasts. With the RBA signalling that it is unlikely to lower rates further in the near-term without a negative surprise, the Aussie should continue to trade on a firm footing heading into year-end potentially testing this year's peak for the AUD/USD rate at the 0.7835-level.
The release overnight of the latest PMI surveys from China will help to support the Aussie as well providing a further positive signal that growth momentum is improving. The manufacturing and non-manufacturing PMI surveys both increased to 51.2 and 54.0 respectively in October. It was the highest manufacturing PMI reading since July 2014. The improving growth momentum has coincided with renewed upward momentum in the price of iron ore in the second half of this year.
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