The Australian dollar declined in Asia amid the release of a downbeat central bank minutes for wage inflation.
The AUD/USD pair traded at 0.7539, 0.15% lower, while on the other hand, USD/JPY exchanged at 112.56, down 0.05%.
In Australia, the minutes of the November 7 policy meeting was published on Tuesday, the RBA board discussed “that in most advanced economies, growth in wages and hourly earnings had been low, despite ongoing reductions in spare capacity.”
“They discussed the possibility that globalization and technology were leading wage growth to be less responsive to changes in the demand for labor, which could continue for a while,” according to the minutes.
The RBA meeting minutes also showed a projection of central bank’s cautious watching of the labor markets in different major economies, emphasizing limited wage pressures even though full employment has been achieved.
On Monday, the greenback rose sharply overnight against a basket of major currencies, gaining from euro’s slump despite increasing political uncertainty after Chancellor Angela Merkel’s failed attempt to create a three-way coalition in Germany.
This resulted to the euro driving the dollar to a nearly one-week high against its competitors but benefits were capped due to a slight jump in sterling amid quieting Brexit woes. The EUR/USD traded at 1.1738, up 0.04%.
The political uncertainty that swept across Germany weighed on the euro on Monday, after discussions to build the country’s succeeding government fell overnight, rallying questions about Angela Merkel’s future leadership position.
EUR/USD Pair Bounces Back
The EUR/USD pair showed a breakthrough from the overnight consolidation almost four-day lows, as a fresh impetus caused by a renewed risk-aversion wave was received by the bulls. This grips the markets close towards Asia.
The Yen buyers came back to the market as a result to the funding currency which Euro benefited from the re-emergence of risk-off trades, with the political issue of renewed North Korea jitters affecting investors’ decision. This sends USD/JPY lower along with Treasury yields and the US dollar.
The focus will still be on the German political development later today and also the USD dynamics despite the lack of fundamental news out of Euroland. All the while, the US docket seems to stay up float, the only existing home sales pending for release.
However, it remains to be determined whether the spot can sustain the recovery attempts and how long, as Germany continues to tackle its surrounding physical risks which undermines the Euro, especially when it follows the weekend’s failed coalition discussion with CDU’s Merkel to be expected to either go for re-elections or form a minority government.
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