The Australian dollar sank today after the central bank signaled that it may cut interest rates at its next monetary policy meeting. While market participants were already expecting a rate cut in the near future, the confirmation of the dovish outlook still hurt the currency.
The Reserve Bank of Australia released today minutes of the monetary policy meeting that happened two weeks ago. While no change to monetary policy was made at that meeting, the minutes confirmed that an interest rate cut remains a strong possibility:
Members considered the scenario where there was no further improvement in the labour market in the period ahead, recognising that in those circumstances a decrease in the cash rate would likely be appropriate.
Later today, RBA Governor Philip Lowe delivered a speech, also mentioning plans for a cut. In fact, he said that it may happen as soon as the next month:
At our meeting in two weeks’ time, we will consider the case for lower interest rates.
Meanwhile, the Conference Board reported that the Leading Economic Index for Australia rose 0.3% in March. The February increase got a small negative revision from 0.5% to 0.4%.
AUD/USD dropped from 0.6908 to 0.6876 as of 16:20 GMT today. EUR/AUD gained from 1.6160 to 1.6226. AUD/CHF rallied from 0.6962 to 0.6988 intraday but has retreated to 0.6949 by now.
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