The Australian dollar (AUD) depreciated against a basket of major currencies on Tuesday, reaching a two-week low following the Reserve Bank of Australia’s (RBA) widely anticipated decision to maintain interest rates.
The RBA opted to retain the current cash rate of 4.35%, the highest level since November 2011. While the decision itself was expected, the accompanying policy statement offered crucial insights that influenced currency markets.
RBA Signals Confidence in Inflation Normalization, Hints at Rate Pause
The RBA expressed confidence in a medium-term return of inflation to its target of 2%. This outlook, coupled with evidence of a slowing economy, suggests the bank may adopt a wait-and-see approach regarding future rate hikes.
AUD/USD Declines Amidst Robust Dollar Demand
The AUD/USD pair experienced a 0.5% decline, reaching 0.6524, its weakest point since early March. This depreciation reflects continued strong demand for the US dollar (USD) in international markets.
Rate Cuts Remain Off the Table for Now
Despite the seemingly dovish undertone of the RBA statement, Governor Michelle Bullock unequivocally stated that interest rate cuts are not under consideration until a clear path toward achieving inflation targets emerges. While progress has been made in combating inflation, Governor Bullock emphasized that the central bank’s fight remains ongoing.
In conclusion, the RBA’s policy decision and subsequent commentary suggest a shift towards a more cautious stance. The bank is likely to maintain current interest rates shortly. This, combined with broader currency market dynamics, contributed to the recent weakness in the Australian dollar.
AUD/USD Short (Sell)
Enter At: 0.64906
T.P_1: 0.64442
T.P_2: 0.64035
T.P_3: 0.63747
T.P_4: 0.63396
T.P_5: 0.62931
S.L: 0.65808
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