Home ForexForecasts AUD/USD: Aussie dollar yawns as RBA holds firm

AUD/USD: Aussie dollar yawns as RBA holds firm

by SuperiorInvest

The Australian dollar shows limited movement on Tuesday after the Reserve Bank of Australia left interest rates on hold. In the European session it is trading at 0.6493, with an increase of 0.61%.

RBA maintains rates

The RBA left interest rates unchanged at 4.35% at its first meeting of 2024. The central bank raised rates by a quarter point in November but has been reluctant to lower them even as inflation continues to fall. The decision was widely expected and the Australian dollar shrugged it off, gaining just 0.2% after the meeting.

The RBA statement acknowledged that inflation has been falling but remains too high and that “the board expects it will be some time before inflation is sustainably within the target range.” The RBA published an updated inflation forecast, which projected inflation would return to the 2 to 3 percent target range in 2025, but would not fall to the midpoint of the range until 2026.

The message from the RBA was that inflation remains high and sticky and that it is still early to discuss rate cuts. The statement rejected rate cut expectations, saying “a further interest rate increase cannot be ruled out.” The RBA is unlikely to raise rates unless inflation suddenly changes direction and rises higher, but the central bank remains tight in its stance on rates and cautious on inflation. The statement noted that members were concerned about China’s slowing economy and conflicts in Ukraine and the Middle East. Members were also concerned about the delayed effect of monetary policy and household consumption.

Governor Bullock used her press conference to reiterate that the RBA’s number one priority was reducing inflation, and that meant keeping rates in restrictive territory. Bullock said she sympathized with mortgage holders seeking a rate cut, but inflation had to be brought down first and only then could the central bank start lowering rates.

AUD/USD-Daily Chart

AUD/USD Technical

  • 0.6546 and 0.6590 are the next resistance lines
  • 0.6468 and 0.6424 and providing support

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