Reserve Bank Of Australia Kept Cash Rate On Hold
In a widely expected decision, the Reserve Bank of Australia held its cash rate at 1.50% today and took an optimistic view on domestic activity. "The Australian economy is performing well," RBA governor Philip Lowe said in a statement, while predicting a further fall in unemployment.
Yet as consumer prices remain subdued - a major reason for the RBA's steady stance in the past two years - policy makers have shown no urgency to tighten rates. Markets are not fully pricing in a rate rise until well into 2020.
"Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual," Lowe said.
He repeated the outlook for household consumption was a "continuing source of uncertainty" as incomes remained weak while debt levels were high. 
The GDP report is due on Wednesday and is forecast to show growth of 0.6% in the September quarter from the June quarter when the economy expanded 0.9%. Annual growth was likely 3.3%, tracking a brisk 3.4% the previous quarter.
Lowe expects Australia's economy to expand at an annual 3.5% pace over this year and next, helped by solid business investment and strong public spending on infrastructure. His optimism was supported by stronger-than-expected data from the Australian Bureau of Statistics earlier in the day.
Figures showed government spending climbed 1.1% in the third quarter to an inflation-adjusted AUD 109.7 billion.
Public spending accounts for almost a quarter of annual GDP and has been a major driver of growth over the past year or so.
Separate figures showed net exports likely added around 0.4 percentage points to GDP growth last quarter, largely led by liquefied natural gas and tourism. That helped shrink Australia's current account deficit to AUD 10.7 billion.
Trading strategy: Long
Open: 0.7220
Target: 0.7420
Stop-loss: 0.7220 (raised from 0.7120)
Recommended size: 1.50 mini lots per $10,000 in your account
Short analysis: The resumption of global risk appetite on the back of the US-China ceasefire, together with higher oil prices amid speculation of a production cut being agreed at the OPEC meeting this week, managed to lift the AUD. We remain long at 0.7220 and have raised our target to 0.7470. We have also raised the stop-loss to the entry point. The gap from November 30 is likely to be filled and a drop to 0.7325 may be used as a fresh buying opportunity.
Economic research and trading ideas by MyFXspot.com