RBA minutes: Board prepared to ease policy further if needed (AUD lower)

• RBA minutes bring an element of surprise and play into the bear's hands.
• RBA minutes more dovish than prior communication and what the market had anticipated.

The minutes from the RBA Board’s 5th November meeting have been released which shows that the RBA has an easing bias. AUD/USD is lower on the minutes, down -0.20% at the time of writing. 

• Bored prepared to ease policy further if needed and case could be made for a rate cut at November meeting.
• Decided rates should be held steady "at this meeting".
• Board recognised "negative effects" of lower rates on savers and confidence.
• Rate cuts could have different impact on confidence than in the past.
• Saw case to wait and asses impact of "substantial" stimulus already delivered.
• Agreed extended period of low interest rates would be required to meet targets.
• AUD at lower end of range of recent times.
• Saw "moderate" Australian GDP growth for the September. 
• Considerable uncertainty over the outlook for household consumption.
• Risks from home building sector tilted to downside, could delay recovery.
• Liaison showed firms expected steady wages growth, very few saw a pick up.
• Risk extended period of low wage growth could lower wage expectations, norms.
• Board agreed a lift in wages growth would be a "welcome development".
• Risks to global growth forecasts still tilted to downside.

There is some element of surprise there considering that this is more dovish than what the central bank's Statement on Monetary Policy portrayed which one of its messages went as follows: “The Board was mindful that rates were already very low and that each further cut brings closer the point at which other policy options come into play”.

FX implications:

We had already seen a very lengthy quarterly statement but markets that are already somewhat positioned with the potential of further rate cuts ahead are likely to be cheering such rhetoric as this, cementing the case for further rate cuts to follow – Prior to the minutes, "markets were pricing a 20% chance of easing at the Dec RBA meeting, and a terminal rate of 0.50% (RBA cash rate currently at 0.75%)," analysts at Westpac had noted and that is likely now going to be higher on this outcome. 

Technically, AUD/USD has been capped by the vicinity of the 200-day moving average at the start of this month. AUD/USD is respecting the descending trend line resistance at this juncture. To the downside, the 0.6730s guard prospects of a test to the YTD lows in the 0.6660s before the 0.65 handle. On the upside, a break of the 200-DMA opens risk to the 0.7020s which meets the 23.6% Fibonacci retracement level of the 2018 highs to July 2019 lows.