AUD/USD: RBA is maintained since inflation risks maintain the rate cuts

• RBA left 4.1%rates, highlighting the risks of inflation on “both sides.”
• The labor market is still tight, there are productivity problems.
• The price of markets has a 78% probability of a 25 -bp cut in May.
• Aud/USD Downside risk building.

RBA keeps stable rates at 4.1%

The Bank of the Australian Reserve () remains cautious in Australian inflation perspective, suggesting that the risks remain on “both sides” after maintaining the stable cash rate at 4.1% in April.

“Recent information suggests that underlying inflation continues to relieve the most recent forecasts,” he said. “However, the Board must be sure that this progress will continue so that inflation returns to the midpoint of the target band sustainably. Therefore, it is cautious about the perspective.”

The equilibrium act continues

For those who have not closely followed the RBA, he chose a different path to most other central banks in this cycle, choosing not to lift rates as aggressively as others to preserve the profits of the labor market that leave the pandemic. Compensation was a slower return of the objective.

While starting its flexibility cycle in February, which reduced the effective rate of 25BP to 4.1%, the act of balance to reduce inflation while maintaining the conditions of the strong labor market continues, ensuring that there is a cautious posture.

It also means that comments on these areas are much more important than other information contained in the policy declaration.

The Board continued to suggest that labor market conditions remain “tight”, pointing out the measures of the underutilization of labor “sitting at relatively low rates.” And although the salary pressures had “relieved a little more than expected,” he replied that by pointing out that the growth of productivity “had not recovered.” The Board clearly wants to see that productivity improves to feel sure that inflation pressures does not resurface.

It should be noted that the Board suggested that private domestic demand “seems to be recovering”, with income from real households that “collected”, while there had been a ease of “some financial stress measures.”

Although he recognized large amounts of uncertainty regarding the perspectives, including the commercial policy of the United States, the rest of the declaration provided a strong reminder that the RBA is not in a hurry to further reduce rates unless it is requested. That may come from the Inflation Report of the March quarter that is due at the end of April or a strong increase in unemployment or market turbulence driven by commercial uncertainty.
Source: Bloomberg

Any of these plausible results could be sufficient for RBA to reduce rates again on May 20, explaining why swap markets currently have a price of 78% of another 25 PB reduction to 3.85%. However, if external conditions improve rapidly, it would challenge market expectations for three 25 PB cuts this year.

Australian bond markets were initially sold in the tone of the statement, with the 3S10 ACGB curve marginally bull’s flattening, suggesting that it was less misleading than expected. However, that movement was invested later, limiting a small advance in the Australian dollar immediately after its launch.

AUD/USD: Risks to low construction

Source: TrainingView

He broke the upward trend in which he had been in several months on Monday, keeping below that level despite improving the risk appetite. Sellers superior to .6259 are limiting profits, with a greater possible resistance in the old bullish trend and .6330.

On the negative side, .6188 will be focused, with a break of that level that opens the way for a race towards .6088.

RSI (14) is a lower and lowest trend. Macd is a little less bassist but also revolves lower. Together, impulse signs remain neutral with a slight downward inclination.

The press conference of RBA governor Michelle Bullock at 3:30 pm is the next key risk event for Aud/USD merchants. Later in the session, the PMI survey and ISM manufacturing jolts could also generate volatility.

Original publication