Aussie Dollar Downtrend Intact After RBA, Lowe Speech and GDP Due
- The Reserve Bank of Australia left interest rates at their 1.50% record low, as expected
- It stuck with its customary concerns about slow inflation and consumer debt
- Focus now turns to Wednesday’s growth data and a speech from Governor Lowe
The Australian Dollar was steady Tuesday after the Reserve Bank of Australia did as everyone expected it to and left interest rates alone for March.
The key Official Cash Rate thus remains at its 1.50% record low. Interest-rate futures markets are still happy to bet that it won’t go lower still and that the next move, when it comes, will be an increase. However, they don’t fully price even a quarter percentage point rise until well into next year.
The RBA’s post-decision statement was essentially similar to the fare it has offered in recent months. It noted that inflation remains below target- despite the relatively strong performance of the Australian economy- thanks to weak wage settlements and retail competition. The RBA thinks that inflation will rise to its 2% target level this year but that it will remain low for some time. It took another chance to fret high levels of Australian consumer debt.
The central bank opted not to increase the volume of its rhetoric against Aussie Dollar strength, confining itself to merely noting that a rising currency does affect its ability to hit inflation and growth targets.
AUD/USD didn’t move much on the decision, which is hardly surprising as there was virtually nothing for it to move on. The currency had been steady though the Asian session despite data showing weaker than expected retail sales and a wider trade gap.
This is the first major risk event out of the way for the Australian Dollar this week, but there are two others. RBA Governor Philip Lowe will speak in Sydney on Wednesday. That session will also bring official Australian growth numbers, for which you can join me live at the DailyFX Webinars.
On its broader daily chart, AUD/USD remains resolutely in the downtrend channel which has prevailed since the pair topped out at three-year highs in late January. While it would seem foolish to try and fight this overall trend, the pair does seem to be attempting a base around current levels, which have held the market for the last four days or so.
If they can hold then a modest fightback to late-February’s highs in the 0.7852 region could be in the cards. However, the uncommitted may wish to wait and see whether this range building survives a weekly close before placing any bets in that direction.
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--- Written by David Cottle, DailyFX Research
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.