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Aussie Rallies as RBA Statement Doesn’t Show Dovish Stance

February 5, 2019 at 13:10 by Vladimir Vyun

Reverend John Flynn on Australian 20-dollar billThe Australian dollar rallied today after the monetary policy statement of the Reserve Bank of Australia. While analysts had expected the central bank to demonstrate extremely dovish stance, the actual statement was considered to be either neutral or even slightly hawkish.

The RBA maintained its main interest rate at 1.5%, as was widely expected. The central bank cut its economic forecasts. Now, the bank expects growth of 3% in 2019, down from 3.5% in the previous forecast, and inflation to hit 2% this year, while previously the RBA was predicting inflation to reach 2.25%. Despite that, the statement said:

Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual.

It made analysts think that Australian policy makers maintained tightening bias, though it will take them longer to start raising interest rates.

As for macroeconomic data, it was mixed. Retail sales dropped 0.4% in December from November, while experts had predicted no change. At the same time, the trade balance surplus widened from A$2.26 billion to A$3.68 billion, whereas economists had also expected basically no change.

AUD/USD gained from 0.7224 to 0.7243 as of 12:58 GMT today. EUR/AUD declined from 1.5821 to 1.5765 after rising to the daily high of 1.5898 earlier. AUD/JPY advanced from 79.37 to 79.65.

If you have any questions, comments, or opinions regarding the Australian Dollar, feel free to post them using the commentary form below.

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