The Australian dollar is in negative territory following the RBA decision to pause rates at 3.60%. The US releases JOLTS Job Openings, which is expected to fall to 10.40 million, following a prior reading of 10.82 million.
In the European session, AUD/USD is trading at 0.6744, down 0.61%.
RBA takes a breather
The streak is over. After raising rates 10 consecutive times, the Reserve Bank of Australia (RBA) has taken a pause, holding the benchmark cash rate at 3.60%. The decision was widely expected by the markets, but the Australian dollar has nevertheless lost ground, as Governor Lowe’s statement was on the dovish side.
Lowe defended the pause by saying that the RBA had raised rates by 350 points since May and there was a lag until the full effect would be felt. As well, there had been a “substantial” slowing in household spending and a slowdown in the Australian economy.
As for the banking crisis, Lowe noted that the Australian banking system was solid, but the crisis was expected to lead to tighter financial conditions which would be an additional headwind for the global economy”. Lowe is being cautious about the banking crisis, reassuring listeners that Australia’s banks are safe but that doesn’t mean there won’t be any fallout.
The markets picked up on nuances in the language of the statement, which read, “some further tightening of monetary policy may well be needed.” The use of “may” replaced “will” in last month’s statement, suggesting a more dovish rate path.
Governor Lowe did an adequate job of explaining the pause in rates, but inflation remains more than triple the target of 2%, so clearly, the fight against inflation is far from over. Lowe will be hoping that inflation continues to drop before the next meeting on May 2nd, which would provide support for another pause in rates.
- There is resistance at 0.6790 and 0.6897
- AUD/USD has support at 0.6678 and 0.6582