Australia’s Central Bank holds rate unchanged

Yesterday, the Australian Dollar sank against its US counterpart early, after the Reserve Bank of Australia (RBA) finished its July policy meeting with rates staying at a record low of 1.5%, where it has been since August last year and signaled that it was unlikely to raise rates anytime soon.

The RBA did sound optimistic about future economic growth, but cautioned against record high household debt in the country’s red-hot property market especially as wages growth was stuck at its slowest pace ever.

On Monday, Sterling fell for the first time in nine days versus the US Dollar after the release of downbeat UK manufacturing data in June, raising doubts about the outlook for the economy. Data showed that Markit’s Purchasing Managers Index for manufacturing dropped to 54.3 last month from a revised 56.3 in May.

The slowdown signals that Brexit-related uncertainty was affecting companies and households. The Pound reached a one-month high against the Dollar last week and Gilt Yields rose after hawkish rhetoric from BoE policymakers which culminated in Governor Carney saying that “some removal of monetary policy is likely to become necessary”.

Also on Monday, the US Dollar recovered ground, as higher US government Bond Yields helped halt a run of losses that added up to the currency’s worst quarter since 2010. The Dollar edged higher after private index of June domestic manufacturing activity rose more than expected while other data showed government outlays on construction projects in May at their highest in more than four years. Two-year US Treasury Yields surged to 2.35%, the highest level since November 2008.