The big surprise in monetary policy this week was that the Reserve Bank of Australia not cutting rates. The market had priced in a 90% chance of a move but Governor Bullock left rates unchanged on Wednesday at 3.85%.
“I understand that people had expected there might be a rate cut today, my message to them is, provided that we are on top of inflation, then yes, there is an easing cycle coming,” she said.
That dovish message means the market is pricing in an 87% chance of a cut in August but the decision also marked a reversal in AUD/USD and it's now challenging last week's highs.
Helping the Aussie along is an improving picture around risk appetite with US equity indexes near record highs. The market has also able to consistently shrug off Trump tariff threats as immaterial or as bluffs.
If AUD/USD can break the July highs, it would be the best levels since November and could be on track to challenge the Sept 2024 high of 0.6942. The pair has now cleared the 61.8% retracement of the Sept '24 to April '25 slump, which also points to upside. Keep an eye on Chinese economic data for further positive signs but also be wary of a hawkish USD repricing if US economic data continues to remain solid, particularly employment.
This article was written by Adam Button at www.forexlive.com. Read More Details
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