AUD/USD to New 2023 Lows after another RBA Rate Hold
AUD/USD Analysis
The Reserve Bank of Australia maintained rates at 4.1% for fourth consecutive meeting on Tuesday, in the first policy decision under Ms Bullock, who did not really change much in her statement, compared to her predecessor. She reiterated that inflation has "passed its peak", that employment conditions "have eased a little" and that the economy is at a period of "below-trend growth", which she expects to "continue for a while". [1]
On the other hand, she maintained that inflation is "still too high", with last week's data showing an increase to 5.2% y/y in August. She also continues to see tightness in the labor market, while acknowledging that the economy was "a little stronger than expected" in the first half of the current year.
This prompted policymakers to once again keep the door open to more hikes, saying that "some further tightening of monetary policy may be required" for bringing inflation back to the 2-3% target within "a reasonable timeframe".
At the same time, various Fed voters kept more tightening in play with their latest commentary, following the hawkish bias of the last policy decision. Ms Bowman on Monday warned it "will likely be appropriate" to raise rates further [2]. Mr Williams was more reserved, but did not rule out more hikes, saying that rates are "at, or near, the peak level". [3]
AUD/USD reacted to the RBA hold with new 2023 lows, at a time when the greenback benefits from the higher-for-longer narrative of the US Fed. Bears come closer to testing 0.6271, although 0.6169 has a higher degree of difficulty.
On the other hand, Australian policymakers have kept more hikes on the table, while us inflation is much closer to target. Headline PCE tickled up to 3.5% y/y in August, but the headline printed +3.9% y/y in the smallest increase in almost two years.
AUD/USD already tries to find support and may get the chance to recover, but will need closes above the EMA200 to pause the bearish bias. It does not inspire confidence for achieving this under these conditions and the upside is unfriendly.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 03 Oct 2023 https://www.rba.gov.au/media-releases/2023/mr-23-25.html | |
| Retrieved 03 Oct 2023 https://www.federalreserve.gov/newsevents/speech/bowman20231002a.htm | |
| Retrieved 02 May 2024 https://tellerwindow.newyorkfed.org/2023/09/29/peeling-the-inflation-onion-revisited/ |
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.