The Australian dollar has reversed directions and is in positive territory on Tuesday. AUD/USD is trading at 0.7154 in the European session, up 0.37% on the day.
RBA preaches patience on rate hikes
The RBA released the minutes of the February meeting earlier today, providing a welcome distraction from the incessant news from the Ukraine. Investors liked what they saw and sent the Aussie higher. The minutes indicated that the RBA would remain patient and was not convinced that inflation was sustainable within its target of 2%-3%. In particular, wage growth was lagging behind inflation. At the same time, it acknowledged that inflation had risen higher than anticipated, which contributed to the decision to end QE this month.
The RBA continues to preach patience before it will hike rates, but how patient is patient? The central bank doesn’t appear ready to hike before 2023, but the markets remain more hawkish, expecting a rate hike later in the year. CommBank, the country’s largest bank, has brought forward its projection of a lift-off date from August to June. The bank’s inflation forecast is much higher than the central bank – CommBank expects inflation to hit 1.2% in Q1, while the RBA is predicting 0.75%.
The crisis on the Ukraine/Russia border remains at a fever pitch, although there are still hopes that a diplomatic solution can be found which would avoid a war in Europe and all its ramifications. German Chancellor Olaf Scholz is in Moscow in last-ditch effort to prevent an invasion. The cards are in the hands of Russian President Vladimir Putin. The West has no intention of defending Ukraine militarily, so the key question is whether the threat of sanctions is enough to dissuade Putin from starting a war in Europe, which could have severe ramifications.
AUD/USD Technical
- AUD/USD continues to rally and is testing resistance at 0.7168. Above, there is resistance at 0.7258
- There is support at 0.6987 and 0.6896
