Hawkish Cut From RBA
AUDUSD is holding steady through early European trading on Tuesday despite the RBA cutting rates once again overnight. The bank slashed rates by a further .25% to 4.1% but were less forthright on the prospect of additional easing, avoiding the heavy selling we might otherwise have seen in the pair. RBA governor Bullock was clear in her attempts to pushback against the recent dovish repricing we’ve seen in the market’s RBA rates outlook, citing the ongoing inflation risk which needed to be managed.
RBA Rate Expectations
The market is currently pricing in just below two further cuts this year. Looking ahead, incoming inflation data will be decisive with any further uptick likely to see these projections scaled back, leading to a stronger AUD. On the other hand, a fresh decline in inflation should see near-term easing expectations rising, weighing on AUD.
Weak USD Helping Aussie
The backdrop of a weaker US Dollar over the last fortnight is feeding into AUD strength today, despite the greenback seeing some better demand this morning. Weaker trade-war risks linked to Trump’s shift in tone on reciprocal tariffs has helped bolster commodities and commodity currencies which should keep AUD underpinned for now. Traders will now be looking ahead to tomorrow’s Aussie wage price index which should provide some fresh inflation insights and some near-term direction for AUDUSD followed by the unemployment rate on Thursday.
Technical Views
AUDUSD
For now, the pair remains capped by the .6362 level and the underside of the broken bull trendline. This area is now a key pivot for the market with a break higher here likely to open the way to a broader recovery rally towards .6520 initially. Downside, .6275 and .6195 remain key supports to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.