The Reserve Bank of Australia decided to leave the cash rates steady for the third consecutive time, at 0.25 percent.
The Bank's Governor, Philip Lowe commented that the recovery of the Australian economy is probably going to be both uneven and bumpy while acknowledging that the peak in cases in Victoria is heavily influencing the state of the economy. However, the Governor highlighted that despite the economy which was experimenting its biggest drop since the great depression, the contraction was not as severe as previously expected by the bank's policymakers.
According to the estimations of the Bank, the economy is set to contract by 6 percent this year, while the official unemployment rate would be around 10 percent by the end of 2020. This is mainly due to further job losses in Victoria as well as the fact that there are more Australians looking for a job right now. The Bank also expects that the unemployment rate will fall to 7 percent by 2022.
Lowe also announced the Bank's decision to restart its bond purchase program, highlighting that the Bank is willing to buy as many bonds as needed with the purpose to keep three-year yields near 0.25 percent.
“Given this, tomorrow the Bank will purchase AGS in the secondary market to ensure that the yield on 3-year bonds remains consistent with the target,” commented Lowe, “Further purchases will be undertaken as necessary,” he added.
By 6:14 GMT the Australian dollar gained 0.04 percent against the greenback, hitting the 0.7126 level. Conversely, the New Zealand dollar advanced 0.06 percent, hitting the 0.6614 level.
Oil Markets and US Stocks Advance on Coronavirus Cases Drop
Yesterday, the oil markets advanced despite the OPEC+ decision to increase its supply by 2 million barrels per day.
On August 1, the OPEC+ eased its supply cuts from 9.7 million barrels per day to 7.7 million barrels per day. This, added to the advance of the coronavirus outbreak around the world is weighing on the market.
The West Texas Intermediate crude oil futures gained 2.09 percent during the session, closing at the 41.01 level. Conversely, the brent oil futures advanced by 1.61 percent, closing the session at the 44.15 level.
At the moment there are 18,446,766 confirmed Covid-19 cases, as well as a death toll of 697,222. The United States leads on number of infections, with 4,862,174 confirmed Covid-19 cases as well as a death toll of 158,929, followed by Brazil, India, and Russia.
It has been reported by the media that the surge of the coronavirus outbreak is slowing in the South and the West of the United States. This set a positive tone on the stock markets, which opened the month on the positive territory.
The Dow Jones Industrial Average gained 0.89 percent during yesterday's session, closing at the 26,664.40 level, while the S&P 500 advanced 0.72 percent, closing the session at the 3,294.61 level. Conversely, the Nasdaq 100 went up by 1.37 percent, closing the session at the 11,055.08 level, while the NYSE Composite gained 0.58 percent, closing the session at the 12,536.81 level.
European indices also managed to close on the positive territory. The DAX gained 2.71 percent during the session, closing at the 12,646.98 level, while the CAC 40 went up by 1.93 percent, closing the session at the 4,875.93 level. Conversely, the IBEX 35 went up by 1.42 percent during the session, closing at the 6,975.00 level, while the Euro Stoxx 50 gained 2.33 percent, closing at the 3,248.28 level.