As widely expected no policy change and as equally anticipated the RBA did mention that the exchange rate is providing headwinds on growth, but current price action is the key.
AUDUSD has continued to grind higher all session pushed on by stronger than expected China Caixin PMI that has commodities looking buoyant. While the USD weakness has been driving the commodity bloc ship of late, it now looks like commodity prices themselves are providing another thorn in the RBA’s side who have been leaning against the current Australian dollar ramp. But with little follow through after both Debelle and Lowe jawboning the currency last week, there was a high chance for the RBA to disappoint the doves, and price action suggests this
Despite holding in neutral gear, on the whole, the statement was balanced, and we could see A $ extension fueled by a weaker US dollar, surging iron ore prices and RBA soft shoe approach.
The RBA continues to point out concerns regarding low wage growth and labour under-utilisation, combined with recent more delicate CPI print, so it’s unlikely the RBA will withdraw monetary stimulus this year, but this alone is not enough to shift the current tidal wave of A$ demand
The immediate reaction was to see a fall from around 0.8020 to 0.7995 . We have since come back 0.8020 +
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