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RBA preview: CPI/jobs trend poses risk to more dovish language

FXStreet (Bali) - Ahead of today's RBA monetary policy meeting, in which no material changes in language are expected, one should not ignore the fact that since the last gathering, the two main mandates the Central Bank needs to look after, that is, price stability and full employment, have taken a turn for the worse. Will that be reflected in today's statement? That's is the key question.

Today's ABS revisions confirms a broadly weaker Australian labour market, with July-Aug employment at -9k vs +32.1k prior and Sept -23.7k vs -29.7k prior. Besides, Sept jobless rate was 6.2% vs 6.1% prior, and the participation rate was at its lowest since 2006. While the revisions are unlikely to prompt any immediate action by the RBA, risks are building up for a more dovish stance going into year-end/Q1 2015, which should translate in any AUD upside limited.

Even with soaring housing price across Australia, which has led the RBA to step up its coordination efforts with Australia's Macro-Prudential Office - building permits fell by 11% in Sept - , the downturn in inflation pressure and employment conditions, will make the prospects of rising rates to combat house price all the less likely; that should ensure a significant period of stability in rates at the bare minimum, and perhaps it may be about time to start assigning some small chances to rate cuts in 2015 if the jobs/CPI trend stays the present course.

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