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17/06/24
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AUD Drifts Before RBA Decision
On Monday, the Australian dollar drifted, and AUD/USD traded at about 0.6605, down 0.14% for the day in the European session. The Australian dollar rose by as much as 1.8% last week but trimmed most of those gains.
On Tuesday, the Reserve Bank of Australia will make its rate announcement and is generally expected to keep rates unchanged for the 5th straight time.
The 4 major Australian banks all expect that the RBA won’t make a move. The RBA has maintained rates at 4.35% and is not confident enough to begin lowering rates due to persistent inflation. Q1 inflation was higher than expected and rose 3.6% y/y. This was lower than Q4 2023’s 4.1% but higher than the 3.4% market estimate.
The RBA has stuck to its hawkish stance and Governor Bullock last week reiterated that the central bank may hike rates if inflation doesn’t drop as expected. Although a rate hike is unlikely, as the economy has been easing, the fact that a rate hike is still possible means that a rate cut won’t happen soon and may be delayed until next year.
Besides persistent inflation, another factor that complicates decisions to cut rates is the tight labor market in Australia. Unemployment is less than 4% and increasing immigration means that job vacancies are still tight.
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