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AUD/USD Makes Small Gains as RBA Sticks to Script

AUD/USD Makes Small Gains as RBA Sticks to Script

David Cottle, Analyst


Talking points:

  • The Reserve Bank of Australia stuck to its guns on Tuesday
  • The cash rate was left alone at a record low, statement language remained largely unchanged
  • However, there are signs that the housing market is now closer to the top of the RBA’s in-tray

The Australian Dollar got a small lift after the Reserve Bank of Australia left interest rates alone.

That left the cash rate at its 1.50% record low.

The RBA largely stuck with its previous line when it came to the economic horizon. It still sees moderate domestic and global growth, a mixed employment picture and resilient consumer and business sentiment.

The only standout from the statement was the comment that house prices were rising “briskly,” the first time this term has been used.

Investors already knew that regional prices had been rising sharply especially in cities like Sydney and Melbourne; the RBA is clearly keeping a closer eye. That might further argue against lower rates in the future, all else being equal.

Turning more specifically to the currency the RBA said that, while low rates have been supporting domestic demand, an appreciating Australian Dollar could “complicate” the Australian economy’s transition from its high reliance on exported raw materials.

However, this was not a new song from the RBA. It has a long history of cautioning against what it regards as unwarranted currency strength. The Australian Dollar was at US$0.76443 after the numbers, just above US$0.76033 before the release.

As all Aussie watchers know, Tuesday is the day of the Melbourne Cup. This annual horse race is obsessively watched and bet-on by many Australians, and may well mean that many trading desks in Sydney are more thinly staffed than they would otherwise be.

Chart created using TradingView

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.