The Australian dollar attempted to rally today after the release of monetary policy minutes from the Australian central bank and domestic macroeconomic data but failed and continued its crash to new multi-year lows. The outlook for another interest rate cut was not helping the Aussie either.
The Reserve Bank of Australia released minutes of its March 3 monetary policy minutes, at which Australian policymakers decided to cut the main interest rate by 25 basis points to 0.5%. They discussed the negative impact of the coronavirus pandemic on the global economy:
In considering the policy decision, members observed that it was becoming increasingly clear that COVID-19 would cause major disruption to economic activity around the world.
That impact was passed on the economy of Australia, causing significant weakness:
The advent of COVID-19 around the world was having a significant effect on the Australian economy, particularly in the education, transport and tourism sectors. The uncertainty associated with the outbreak was also likely to affect household spending and business investment in coming months.
As a result, policymakers decided that the economy needs additional stimulus. It is expected that interest rates will remain low for a prolonged time:
Members agreed that it was reasonable to expect that an extended period of low interest rates would be required in Australia to reach full employment and achieve the inflation target.
Furthermore, the central bank showed readiness for additional cuts in case of necessity:
The Board was prepared to ease monetary policy further to support the Australian economy.
In fact, the RBA signaled on Monday that it will take additional measures on Thursday, and market participants count on another 25 basis point cut.
As for macroeconomic data, the Australian Bureau of Statistics reported that the House Price Index rose by 3.9% in the December quarter from the previous three months versus the expectations of a 4.5% increase.
AUD/USD dropped from 0.6102 to 0.5996 as of 12:19 GMT today, and its daily low of 0.5981 was the lowest since April 2003. EUR/AUD traded at 1.8343 after opening at 1.8304 and falling to the daily low of 1.8148. Its daily high of 1.8403 was the highest since April 2009. AUD/JPY declined from 64.59 to 64.12 after rallying to the daily high of 65.83.
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