Aussie Dollar Rebounds as RBA Disappoints Dovish Hopes

Talking Points:

• Aussie Dollar gains after RBA maintains neutral, data-dependent stance
• AUD/USD rally seems to suggest traders were looking for dovish posture
• Losses after soft China PMI data retraced, focus turns to 4Q GDP data

The Australian Dollar erased overnight losses after another neutral RBA monetary policy announcement. While no change in rates was expected, traders seemed to be speculating that a recent deterioration in economic metrics would spur a dovish shift in rhetoric, paving the way for easing in the months ahead.

Governor Glenn Stevens and company opted for the status quo however, judging the current setting policy as appropriate to deliver continued growth with inflation close to target. The door for easing was left open however, with Stevens saying that low inflation offers scope for rate cuts should that be appropriate.

The Aussie was on the defensive ahead of the RBA announcement after a disappointing set of Chinese PMI figures. The data set showed the manufacturing sector contracted at the fastest pace since November 2011 while services growth hit the weakest since the Great Recession trough in 2008.

--- Created by Ilya Spivak, Currency Strategist for DailyFX.com

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