RBA Cash Rate

Actual 7.25%, Expected 7.25%, Previous 7.25%

Release Explanation: This is the Interbank overnight lending rate. It sets the tone for mortgages, commercial loans, and all economic lending criteria. An increase in Interest Rate will have the effect of slowing economic growth. A decrease in Interest Rate is used by a Central Bank to stimulate economic growth. Economic strength can create Inflation, raising Interest Rates is one of the easiest way to contain Inflation.

Trade Desk Thoughts: The overnight rate in Australia was left at 7.25, inline with analyst estimation, but for the first time in years it seems that the central bank puts more empathy on assuring growth than fighting inflation. The bank’s inflation projections are on the downside, although risk on the near term may very well remain. However, the tight credit conditions, a weak housing market, and a general feeble business activity have forced the central bank to focus on growth and evaluate a rate cut at the next meeting.

Forex Technical Reaction: The Aussie fell almost 50 pips at the time of the release, creating a spike in volume at the same time. The pair is trading lower for almost two weeks creating a 5% deficit since the 25-year high made in July. The nearest support to the downside looks to be the 200-day simple moving average, only 30 pips away.

The LFB-Forex.com