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The Australian Dollar has been a little softer on the back of the latest meeting minutes, released overnight. The minutes revealed that while most members agreed that further tightening would likely be necessary, concerns over the health of the economy warranted a fresh pause in July. In particular, the board was concerned over gathering economic headwinds and the uncertainty around household consumption. With inflation still elevated and interest rates have risen sharply, the RBA fears a bigger squeeze to come on households as policy lags continue to take effect on the economy.
 

Wage Growth Below Inflation

With wage growth still sitting well below the inflation level, the minutes cited fears that the economy might slow more than is currently expected. Looking ahead, the minutes noted that if rates are raised too aggressively this would have a negative impact on employment, sending the unemployment rate higher and rerailing the bank’s efforts to get inflation back to target.
 

Near-Term Risks

For now, market pricing for a further hike in August is sitting around the 20% mark. With the bank citing a data-dependent stance now moving forward, incoming readings ahead of the next RBA meeting will be closely monitored with AUD subject to fresh downside risks on any weakening data.
 

Technical Views

AUDUSD

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The rally in AUDUSD has stalled for now into a test of the .6857 level resistance and bear trend line. Momentum studies are weakening here, suggesting room for a further correction lower. While .6681 holds as support, however, .7103 remains in view as the next target for bulls above current resistance. 

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