- RBA says rate hike was necessary to avoid further increases
- Fed releases meeting minutes later today
He continues to recover. In the European session, AUD/USD is trading at 0.6567, up 0.15%. The Australian dollar has been strong, rising more than 3% since November 14.
Detailed RBA Minutes Rate Increase
The Reserve Bank of Australia’s minutes, released today, provided insight into the rate hike at the November meeting. Markets perceived the increase as a “moderate rise” and the Australian dollar fell sharply following the decision. However, the minutes show a different view of the increase, stating that it was aimed at reducing the risk of a “broader monetary policy response”, given persistently high inflation and a strong economy.
The minutes noted that inflation risks remain skewed to the upside and that the RBA’s forecast that inflation will fall within the 2%-3% target range was based on one or two rate hikes. The RBA statement at the November meeting also warned that inflation remained too high but markets did not pay much attention. Instead, investors focused on language that suggested the bar for further rate hikes had been raised. Markets have priced in a pause in December by 95%, but the minutes could serve as a strong reminder that the RBA is serious when it says further rate hikes are possible.
The Federal Reserve will release the minutes of its November meeting today. At the meeting, the Federal Reserve kept rates between 5.25% and 5.50% for the second consecutive time. Fed Chair Powell took a hawkish stance after the meeting, saying inflation remained too high and leaving the door open to further rate hikes. I hope the minutes contain a similar message, but it is questionable whether markets will change expectations for a rate cut in mid-2024, even if the minutes are hawkish.
- AUD/USD is putting pressure on the resistance at 0.6587. Above, there is resistance at 0.6660.
- 0.6526 and 0.6470 provide support