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Disappointing Building Approvals, AUD / USD is Getting Depressed

Australian development permits were mired in March, complementing a series of disappointing releases of the country's Kangaroo economic data in recent times. The Australian Department of Statistics released Building Approvals data which was -15.5 percent MoM (Month-over-Month) in March, worse than expectations of a decline of -12.0 percent in a Reuters poll. 

In comparison, the release of the previous period posted an increase of 19.1 percent MoM. Meanwhile, Australia's annual Building Approvals (YoY) also fell significantly from -12.3 percent to -27.3 percent. This figure is lower than the expected decline to -25.1 percent.

Please note that Building Approvals are fundamental indicators that measure the number of new property development permits from the Australian Government. They are used to predict future construction activities. The release of the Building Approvals, which drastically reflected the conditions of the Australian property market that had not shown a positive trend.

 

 

Open the RBA Rate Cut Opportunity

After the release of quite disappointing inflation in the first quarter, then the release of Building Approvals data wallowing in negative territory, the view of market participants on the probability of cutting RBA interest rates is increasing. In the last few meetings, the RBA has showed a willingness to reduce interest rates, if the release of economic data gets worse. 

The statement from the RBA was made before the release of quarterly inflation which turned out to fall back in the first quarter of this year. Some analysts are of the opinion that it is unlikely that the RBA will lower interest rates at the meeting in May, even though it confirms that the chances of a Rate Cut in the second semester are almost certain to occur. 

This is especially true if the release of important economic data such as the second quarter of 2019 inflation still shows weakness. AUD / USD breaks below 0.7000A series of disappointing economic data releases has forced the Australian dollar to sharply weaken versus the US Dollar in recent days. 

This condition is reflected in the movement of AUD / USD pairs which is currently at the level of 0.6993, after a while ago had touched the range of 0.6984 which is the lowest level in the last four months. The Australian dollar has the potential to weaken again if the RBA issues a dovish statement or even cuts interest rates at a meeting next week. 

RBA Minutes Dovish, AUD / USD Weakens

The minutes of the Australian Central Bank in April were dovish, thus directly suppressing the movement of the Australian Dollar against the US Dollar. RBA (Central Bank of Australia) released minutes of the policy meeting stating that the inflation trend remained weak even though the labor market in the Kangaroo Country was quite solid. 

The Australian Dollar since the beginning of this week has been able to stay at a high level to continue the significant increase formed at the end of last week.  The Australian Central Bank also said that the opportunity for a rate hike this year is very thin and is more likely to lead to lower interest rates. 

What is the RBA Post-Minutes Economist's Response?

The minutes of the RBA minutes are quite surprising, seen from various highlights of economists who argue if the views of the Central Bank of Australia could significantly reduce the movement of the Australian Dollar. Callow added that policy changes were not the best option in April, but the prospect of a decline in interest rates in August appeared to be increasingly evident, especially if Australia's GDP growth weakened. 

After the RBA minutes, investor focus is currently on the release of Euro Zone ZEW sentiment data due later in the afternoon. The economic sentiment data is expected to affect the movement of the Australian Dollar, especially if the results far exceed market forecasts.

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