The Reserve Bank of Australia (RBA) held the cash rate steady at 4.35% and was subtly hawkish after signaling a delay in anticipated cuts. The cash rate remains above the inflation rate, as the central bank targets a CPI within the 2 to 3% band, with a specific aim of 2.5%. Although the rate hold was anticipated, the RBA’s communication bore a hawkish undertone. This pivot in sentiment is a reaction to persistently low unemployment and rising inflation pressure. As a result, FX traders are keeping a close eye on the AUD-USD because of its proximity to a major resistance level that puts it very close to a bullish breakout.
Economic Data Has Been Inconsistent
RBA Governor Michelle Bullock highlighted that recent economic data has been inconsistent, leading the central bank to adopt a longer-term perspective on policy decisions. She emphasized the need to remain vigilant regarding inflation risks. Additionally, she asserted that the current interest rates are appropriately set to steer inflation back to the target range.
While she does not see an immediate need to increase rates, she hasn’t ruled out the possibility. The RBA is currently opting to maintain its current stance, observing economic trends before making further moves. Although the option of raising rates was discussed, there is no rush to implement such hikes. This approach indicates a cautious but open stance towards future rate adjustments, aiming to limit any negative impacts on the Australian dollar while keeping future options open for policy tightening.
Is the AUD-USD a Buy?
For some analysts, the hawkish tone was a surprise despite weaker overall economic activity and a cautious global outlook. The current technical setup sees the currency pair testing the resistance zone at around 0.6635. In fact, TipRanks’ Summary of Indicators suggests that the AUD-USD is a Buy.
