Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View More
Australian Dollar Yawned After RBA Hike by 0.25% as Expected. Where to for AUD/USD?

Australian Dollar Yawned After RBA Hike by 0.25% as Expected. Where to for AUD/USD?

Daniel McCarthy, Strategist

Australian Dollar, AUD/USD, RBA, CPI, ASX 200, Fed - Talking Points

  • The RBA hiked by 0.25% for the third month in a row to 3.10%
  • AUD/USD firmed ever so slightly on the news but remains in check
  • The RBA see inflation ticking north but believe that it is temporary

Trading Forex News: The Strategy
Trading Forex News: The Strategy
Recommended by Daniel McCarthy
Trading Forex News: The Strategy
Get My Guide

The Australian Dollar eventually kicked higher after the Reserve Bank of Australia (RBA) raised the cash rate target by 25 basis points (bps) as anticipated to 3.10% from 2.85%.

This brings the monetary policy tightening total for this cycle to 300 bps since May. Going into the meeting, the market was somewhat undecided with 16 bps priced in by the futures market. The majority of respondents to a Bloomberg survey forecast a 25-bps lift.

Some parts of the market were looking for a potential 15 bp rise to make a nice round figure of 3.00% for the cash rate. The RBA have previously indicated that they are not concerned about the rate being a round number.

The domestic backdrop to today’s move by the bank is somewhat muddied after mixed signals coming from inflation gauges.

For the first time, the Australian Bureau of Statistics (ABS) published a monthly CPI figure last week. There will be two such releases between the quarterly figures. These prints will cover 62-73% of the weighted quarterly basket. More details can be read here.

The official CPI reading for the RBA’s target band of 2-3% will remain as the quarterly number. The monthly CPI print from last Wednesday showed 6.9% year-on-year inflation in October, way below forecasts of 7.6%.

This is in contrast to the broader third quarter inflation read of 7.3% year-on-year to the end of October instead of 7.0% anticipated and 6.1% prior, an acceleration in price pressures.

How to Trade AUD/USD
How to Trade AUD/USD
Recommended by Daniel McCarthy
How to Trade AUD/USD
Get My Guide

An interesting component in today’s accompanying Monetary Policy Statement (MPS) was that the monthly CPI was cited and noted to be too high.

The bank maintained that they expect inflation to peak at 8% toward the end of this year. They also reiterated their somewhat sanguine view that current high inflation is temporary.

Today’s decision is the last by the RBA until February next year and the setting might have been impacted by the lengthy gap between meetings.

Three hours before the change in rates, the ABS released current account figures that revealed a AUD -2.3 billion deficit for the first time since the first quarter of 2019.

A healthy trade surplus has been offset by a record income deficit, that has been largely attributed to dividends paid by miners to offshore entities.

The Aussie Dollar has been swayed by international developments of late. The market reaction to Federal Reserve Chair Jerome Powell’s comments last week sent the currency higher.

Overnight, perceptions of the Fed getting serious about rate hikes saw a reversal of fortunes across many asset classes with AUD/USD tumbling in the process.

Looking ahead, The Federal Open Market Committee (FOMC) meeting on December 14th could be a crucial driver for AUD/USD. In the interim, it appears that Fed commentary might be the focus for market gyrations across several markets.

The full statement from the RBA can be read here.

AUD/USD CHART

image1.png

Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com

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.

DISCLOSURES