AUD pushes off 3 month lows amid RBA statement and improved China Sentiment

Daily Currency Update

The Australian dollar crept back above US$0.65 Tuesday, bolstered by a hawkish RBA rate statement and an upturn in Chinese and Hong Kong stocks. The AUD managed a partial reversal of Friday and Monday’s post-Federal Open Market Committee sell-off, bouncing off intraday lows below US$0.6478 to mark session highs at US$0.6521. A sharp turnaround on Hong Kong and Chinese stock helped prop up risk appetite while the RBA unaspiringly left rates on hold at 4.35%, yet affirmed their commitment to quashing inflation, refusing to be drawn on when conditions would loosen. In her first post-meeting press conference RBA Governor Bullock stressed the importance that forecasts were based on technical assumptions and that a 50-basis point reduction in H2 should not be construed as forward guidance. Markets adjusted pricing expectations anyway dialing back expectations for cuts and pairing expectations for a first rate cut in June. With implied monetary policy and a stronger Chinese yuan key to any consolidated extension back toward US$0.67 and above Tuesday's RBA update and Asian stock recovery helped firm AUD fortunes and halt the 2024 downturn. We expect some support on moves below US$0.65 as the market has now adjusted expectations for Fed rates. We expect ample volatility in response to changes in rate expectations and the timing and trajectory of monetary policy change throughout the year.