The Australian dollar gained against its most-traded rivals today after the central bank’s chief questioned the efficiency of further monetary policy easing. The currency also got support from the stabilizing market sentiment.
Philip Lowe, Governor of the Reserve Bank of Australia, was speaking today. During the speech, he questioned the effectiveness of easing monetary policy further:
RBA Governor Lowe: It Is Legitimate To Ask How Effective Monetary Easing Would Be Globally
-If Everyone Is Easing, The Effect On Exchange Rates Is Offset
— LiveSquawk (@LiveSquawk) June 23, 2019
That was a surprising comment considering that just last week the RBA hinted at additional interest rate cuts and Lowe confirmed that it is indeed a possibility. It is important to note, though, that the central bank also said that “lower interest rates were not the only policy option available to assist in lowering the rate of unemployment”, hinting that Australian policy makers may consider other ways of stimulating the economy. Indeed, Lowe suggested that investments in infrastructure can be one of such options:
RBA Governor Lowe: More Infrastructure Investment Would Benefit The Australian Economy
— LiveSquawk (@LiveSquawk) June 23, 2019
For now, markets are still pricing a 50 basis point cut by the end of the year. Some analysts think that a cut may happen as soon as July.
Meanwhile, risk aversion on markets subsided after the announcement that the United States are planning to implement new sanctions against Iran. While that means the conflict between the nations persists, at least it is not an outright war.
AUD/USD gained from 0.6929 to 0.6948 as of 9:09 GMT today, touching the high of 0.6960 intraday. AUD/JPY went up from 74.36 to 74.61. GBP/AUD dropped from 1.8361 to 1.8321.
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