Market update: Australian dollar languished near lows after RBA pauses again
The Australian dollar bumper around after the RBA left rates unchanged at 4.10%; the last move by Philip Lowe was in line with market pricing and economist forecasts and the new RBA governor has hurdles ahead.
RBA keeps cash rate steady
The Australian dollar struggled to gain traction on Tuesday after the RBA left its cash rate at 4.10% as widely anticipated by the interest rate market and economists.
The Aussie had been battling going into the decision on slight risk aversion sentiment with equity markets seeing a soft day. The S&P/ASX 200 slid slightly lower from the open but steadied in the afternoon session and was little changed after the RBAs announcement.
Governor Philip Lowe's final decision
The accompanying statement on the monetary policy decision by Governor Philip Lowe cited notable risks around services inflation, the uncertainty around the laggard effects of tighter policy, household consumption and the economic outlook for China given the problems in its property sector.
The statement noted, “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks.”
This was Mr Lowe’s last decision as Governor, and he will hand over the reins in a fortnight to Michelle Bullock.
Ms Bullock has been the Deputy Governor of the bank since April 2022 and has been with the institution since 1985. She has a reputation as a leading economist in her own right.
The appointment is mostly viewed as a steady transfer of leadership at a critical time for monetary policy at the RBA and her recent remarks point toward a similar approach to that of her predecessors.
AUD/USD reaction to monetary policy
Going into today’s monetary policy decision, AUD/USD had been slipping lower as the US dollar strengthened across the board, despite a holiday there overnight.
Perhaps undermining the Aussie, headline current account figures missed estimates earlier today. However, on closer inspection, the statistics could be seen as neutral, given the upward revisions to the prior reading.
In addition, net exports as a percentage of GDP were robust through the second quarter. This points towards another stellar trade surplus that will be released on Thursday.
Australian data today
China's struggles and Australia's GDP projections
Elsewhere in Asia today, China’s attempts to reignite its economy continue to struggle to get off the ground with the Caixin services PMI missing estimates today, further highlighting the RBA’s concerns.
It came in at 51.8 for June, rather than the 53.5 anticipated and 54.1 previously. The composite PMI was 51.7 against 51.9 prior.
On Wednesday, 2Q Australian quarter-on-quarter GDP is forecast to be 0.3% against 0.2% previously. Annual GDP to the end of July is anticipated to be 1.8% against the prior read of 2.3% as the base effect kicks in.
AUD/USD one minute chart price reaction to RBA hike
This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.