Australian Dollar, RBA Policy Decision, Talking Points:
- The RBA left interest rates alone again
- It noted that inflation remains below target but thinks it will rise back into that band this year
- There was little here for Aussie Dollar traders, neutral statement
Find out what the retail foreign exchange community makes of the Australian Dollar’s chances right now at the DailyFX Sentiment Page
The Australian Dollar was steady Tuesday as the Reserve Bank of Australia left its key Official Cash Rate on hold at a record low of 1.50% for yet another month.
This action was universally expected by the markets. Indeed, interest rate futures do not now price-in any increase to the OCR for the remainder of this year and all of 2019. The Australian economy is by no means doing all that badly, especially in the sphere of job creation. However, inflation remains stubbornly below target and, while this is the case, the RBA is thought likely to leave rates alone.
The RBA said as usual that pricing power was likely to remain low for a long time, but that unchanged policy was consistent with economic growth. It also said that consumer prices were likely to rise by 2% this year, which would push them into the central bank’s target range. However for the moment they remain below it, rising an annualized 1.9% at least look.
The RBA also noted that the Australian Dollar remains broadly within the last two years’ range against majoertraded rivals. All up this was another neutral statement, the latest in a long line, and it was unsurprising that AUD/USD traders found little to chew on.
On its daily chart AUD/USD remains well within the dominant downtrend channel which has marked trade for most of this year.
It has been more range-bound for the past couple of weeks, but it seems likely that the yawning gulf in interest rate expectations between the US Federal Reserve and the RBA, allied to well-founded investor suspicions that the Aussie central bank really doesn’t mind a lower currency, will see it slide further.
The 7150.1 level would represent the complete retracement of the pair’s climb from the lows of December 2016 to the peaks of January this year. It may well come into focus shortly.
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— Written by David Cottle, DailyFX Research
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