Australian Dollar Gains Despite RBA Interest Rate Cut
- RBA Cuts Key Rate by 25bps to 2 percent as Expected on Inflation Outlook
- Improvements in Household Demand, Employment May Limit Further Cuts
- Australian Dollar Pushed Broadly Higher, Adding Nearly 1% vs. US Dollar
The Australian Dollar gained nearly as much as 1 percent versus its US counterpart despite an RBA interest rate cut. The movement higher came after the central bank saw improving trends in household demand and growth in the employment sector, hinting that the chances of further easing in the upcoming months may be relatively low.
The Reserve Bank judged that the inflation outlook provided the opportunity to ease further. The RBA cut its cash rate target by 25 basis points to a record low 2 percent as expected. Commenting on the exchange rate, the bank argued that further depreciation of the Australian Dollar seems likely and necessary. It also sees the economy operating with spare capacity with some time yet.
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