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RBA: the next step

Not so long ago, on April 23, I wrote about what to expect from the Reserve Bank of Australia (RBA) – I projected another rate cut, but not earlier than in August. However, quite unexpectedly for me, the Australian central bank decided to take this step at the meeting in May, which was held on Tuesday, May 5th. RBA’s key rate was lowered by 25 basis points to 2%.

However, as I predicted, it was enough time in between the two rate cuts for the AUD/USD pair to test the level of $ 0.79. Moreover, the Australian dollar has even managed to reach the $ 0.8075 mark, but then it fell back again into the range of ​​$ 0.78. I suspect this Aussie’s trip to the “north” wasn’t very much appreciated by the RBA authorities.

I think that it’s the dissatisfaction with the exchange rate of the national currency that prompted the regulator to continue monetary policy easing, without postponing it for a long time. No wonder the accompanying statement following the meeting clearly stated that the weakening of the Australian dollar was not only desirable, but “necessary” for the country’s economy. And if it’s really so, it is likely that in the second half of the year the rate will be cut again.

The thing is that new measures of the Australian central bank have caused the opposite effect so far: having assumed that the easing cycle is already complete, investors began buying the Aussie, sending the AUD/USD pair to a level of $ 0.8 again. Now, apparently, the RBA will have to prove the market that its rate cut potential has not fully exhausted.

The RBA expansionary monetary policy aims at supporting local exporters and bolstering the economy in the conditions of fading investment boom in the county’s mining sector. The urgency of this problem has once again been confirmed by the recent statistics from China – the main consumer of the Australian commodity exports: Chinese purchasing managers index, published by the HSBC bank, fell to an annual low of 48.9 in April.

In February, analysts working for Goldman Sachs and ANZ released a forecast that expected the AUD/USD decline to $ 0.72. While it is difficult to judge whether this forecast is real, I believe, that another rate cut in Australia will be able to bring the Australian dollar back to its yearly lows at ​​$ 0.75-0.7550.

 

Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!

Not so long ago, on April 23, I wrote about what to expect from the Reserve Bank of Australia (RBA) – I projected another rate cut, but not earlier than in August. However, quite unexpectedly for me, the Australian central bank decided to take this step at the meeting in May, which was held on Tuesday, May 5th. RBA’s key rate was lowered by 25 basis points to 2%.

However, as I predicted, it was enough time in between the two rate cuts for the AUD/USD pair to test the level of $ 0.79. Moreover, the Australian dollar has even managed to reach the $ 0.8075 mark, but then it fell back again into the range of ​​$ 0.78. I suspect this Aussie’s trip to the “north” wasn’t very much appreciated by the RBA authorities.

I think that it’s the dissatisfaction with the exchange rate of the national currency that prompted the regulator to continue monetary policy easing, without postponing it for a long time. No wonder the accompanying statement following the meeting clearly stated that the weakening of the Australian dollar was not only desirable, but “necessary” for the country’s economy. And if it’s really so, it is likely that in the second half of the year the rate will be cut again.

The thing is that new measures of the Australian central bank have caused the opposite effect so far: having assumed that the easing cycle is already complete, investors began buying the Aussie, sending the AUD/USD pair to a level of $ 0.8 again. Now, apparently, the RBA will have to prove the market that its rate cut potential has not fully exhausted.

The RBA expansionary monetary policy aims at supporting local exporters and bolstering the economy in the conditions of fading investment boom in the county’s mining sector. The urgency of this problem has once again been confirmed by the recent statistics from China – the main consumer of the Australian commodity exports: Chinese purchasing managers index, published by the HSBC bank, fell to an annual low of 48.9 in April.

In February, analysts working for Goldman Sachs and ANZ released a forecast that expected the AUD/USD decline to $ 0.72. While it is difficult to judge whether this forecast is real, I believe, that another rate cut in Australia will be able to bring the Australian dollar back to its yearly lows at ​​$ 0.75-0.7550.

 

Dear traders, please post your comments to our forecasts and share your own opinion. Your ideas can be very helpful for the newcomers in the forex market. Thank you!



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