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AUD/USD: Aussie Dollar Eyes RBA Rate Decision

by SuperiorInvest

The Australian dollar fell slightly on Monday, after falling 0.90% on Friday. In the European session it is trading at 0.6499, 0.21% less. Previously, AUD/USD traded as low as 0.6486, its lowest level since mid-November.

The RBA is preparing to maintain rates

The Reserve Bank of Australia is expected to keep the benchmark rate at 4.35% at its meeting on Tuesday, its first of 2024. The RBA raised rates in November but has been reluctant to start cutting them, even though inflation has been falling and retail sales fell sharply. in December. There is still some way to go in the battle against inflation, with inflation at 3.4% year-on-year. This is close to the upper band of the RBA’s target range of 1-3%, but as the Federal Reserve has experienced in its battle to control inflation, the last mile of the race has proven to be the most difficult.

What can we expect from the RBA on Tuesday? With inflation still high and sticky, we could see the central bank remain cautious and counter expectations of rate cuts. Last week’s inflation and retail sales reports were weaker than expected, prompting traders to advance bets on rate cuts. Markets have priced in a May rate cut at 50-50 and an 80% chance in June. If Governor Bullock maintains his tough stance, the struggling Australian dollar could get a boost.

Non-farm employment soars in the US.

The US Nonfarm Payrolls report stood out in January with a gain of 353,000, crushing the market estimate of 180,000. The December release was revised upward to 333,000, up from 216,000. Additionally, wage growth rose 0.6% month-on-month, up from 0.4% in December and double the market estimate of 0.3%. This points to a strong labor market.

Markets lowered expectations for a March rate cut to 20% following the jobs release and that has fallen to 15% on Monday, according to the CME FedWatch tool. The 10-year US Treasury yield rose above 4% after the jobs report.

AUD/USD-Daily Chart

AUD/USD Technical

  • 0.6473 and 0.6433 provide support
  • There is resistance at 0.6541 and 0.6581

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