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Australian Dollar Skittish After the RBA Left Policy Unchanged. Where to for AUD/USD?

Australian Dollar Skittish After the RBA Left Policy Unchanged. Where to for AUD/USD?

Daniel McCarthy, Strategist


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Australian Dollar, AUD/USD, RBA, Yields, Commodities, ASX 200 - Talking Points

  • The RBA left the official cash rate at 0.10% as expected
  • Asset purchases to remain at AUD 4 billion a week until February 2022
  • AUD/USD had been trending up prior. Will it continue to climb?
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The RBA left monetary policy unchanged at its December meeting today. The cash rate will remain at 0.10% and weekly asset purchases will continue at AUD 4 billion a week. They remain on track to reconsider their bond purchase program at their next meeting in February.

They stated that “The central forecast is for underlying inflation to reach 2½ per cent over 2023.”

The RBA cited some concerns around the spread of Omicron, but the central bank still expects the recovery to continue. They see the economy to back at pre-Delta levels in the first half of 2022.

They also acknowledged some issues of supply chain constraints impacting activity. The full statement can be read here.

In terms of data, the RBA had the benefit of some fresh numbers from last week to assist in their deliberations. GDP for the third quarter was a beat, coming in at 3.9% for the year on year to the end of October against 3.0% anticipated.

The trade balance was also a slight beat for September, printing at AUD 11.22 billion for the month against forecasts of AUD 11.15 billion. According to ANZ, job advertisements were also up 7.4% for the month of November.

Previously, 3rd quarter headline inflation was 0.8% q/q and the annual headline rate came in 3.0% y/y. The mandated inflation target is 2-3% over the business cycle.

The RBA’s preferred measure, trimmed mean, printed at 0.7% which contributed to the annual print of 2.1% y/y. This helps to explain why the RBA may not be so concerned about headline CPI for now.

This is against a backdrop of strong commodity export conditions, as shown in the trade balance. Much has been made of the collapse in the iron ore price. On the Singapore Exchange (SGX), it touched USD 91 a tonne last month after trading over USD 220 a tonne earlier in the year. It is now consolidating around USD 107 a tonne.

However, the RBA commodity index, that is weighted according Australian exports, remains at elevated levels, thanks largely to energy prices holding higher ground.


Prior to the RBA decision, the ASX 200 had rallied after China had cut their reserve ratio requirement (RRR) by 50 basis points. It was little changed immediately after the RBA’s announcement.

Looking ahead for the Aussie, next week will see business and consumer confidence numbers early in the week before the unemployment data on Thursday.



Chart created in TradingView

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--- Written by Daniel McCarthy, Strategist for

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

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