Australian dollar weakened following the RBA’s decision to maintain interest rates unchanged.
The Australian Dollar (AUD) has fallen sharply following the Reserve Bank of Australia’s (RBA) decision to keep interest rates at 4.35% on Tuesday.
The Australian Central Bank reiterated its forward guidance of “not ruling anything in or out.”
Investor sentiment shifted toward a more hawkish attitude from the RBA, especially after last week’s inflation data exceeded forecasts. However, the RBA admitted that recent progress in reducing inflation has stalled, retaining its forward guidance of “not ruling anything in or out.”
The Australian Monthly inflation rose in March, defying market predictions of standstill. Additionally, RBA Governor Michele Bullock stressed the significance of keeping cautious against inflation threats. Bullock feels that current interest rates are appropriate for bringing inflation back to its goal range of 2-3% in the second half of 2025, and to the midpoint in 2026.
The US dollar increased in value as a result of the Fed’s decision to keep interest rates higher.
The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) versus six major currencies, rises on expectations that the Federal Reserve (Fed) would keep interest rates higher for longer. Furthermore, hawkish comments from Minneapolis Fed President Neel Kashkari boosted the US Dollar, hurting the AUDUSD pair.
President Kashkari stated that the current expectation is for rates to remain stable. for a considerable time. According to Reuters, the possibility of rate hikes is low, but not impossible.
Daily Market Movers: Australian Dollar depreciates due to the dovish RBA.
Australia’s 10-year government bond yield fell to 4.3%, its lowest level in a fortnight. This drop occurred as the RBA decided to maintain the cash rate constant. The lack of explicitly hawkish signals, which many market participants anticipated, led to the muted reaction.
The ASX 200 Index rose for the fifth straight session after the Reserve Bank of Australia’s less hawkish attitude following the Tuesday policy announcement. Key index heavyweights such as Commonwealth Bank, Wesfarmers, and Woodside Energy also had significant increases.
Societe Generale has released a note on the Reserve Bank of Australia, reiterating their belief that the RBA’s optimism about economic growth is unwarranted. The institution expects Australia’s economic growth to slow, with some negative surprises. They attribute their forecast to the widespread repercussions of RBA rate hikes on the economy.
The most recent US Nonfarm Payrolls report shows a significant slowdown from the solid pace seen in the first quarter, falling short of the average monthly rise witnessed over the previous year.
Judo Bank Australia Composite Purchasing Managers Index (PMI) fell in April.
The Judo Bank Australia Composite Purchasing Managers Index (PMI) fell in April, reflecting a little slower increase in Australian private sector output. The expansion in commercial activity was mostly limited to the service sector, while manufacturing output remained. To diminish.
Analysts at Commonwealth Bank and Westpac predict that the RBA’s interest rate will peak at 4.35% in November 2023 before falling to 3.10% in December 2025.
