AUD stumbles in wake of RBA rate announcement
Wednesday 5 April, 2023
Daily Currency UpdateThe Australian dollar retreated through trade on Tuesday after the RBA opted to leave rates on hold. Domestic rates fell dragging the AUD off recent highs north of US$0.6780 and back below US$0.6750. Policy makers adopted a less definitive tone in their accompanying statement suggesting while “some further tightening might be needed” future decision will remain data dependent. While the decision to pause this current tightening, the cycle was largely expected many investors had still priced in one additional 25-point hike. Labour market conditions remain tight and inflation pressures well above the 2-3% RBA target. With the cash rate at 3.6%, the RBA remains well behind other dollar-bloc countries opening risks that the Australian economy could suffer a more persistent inflation backdrop if rates aren’t lifted further. With Oil and energy prices expected to rise headline inflation will likely remain stubbornly high through the near term, forcing the RBA to renew its tightening cycle. Having fallen steadily post the RBA policy update the AUD is the worst-performing major unit through the last 24 hours. After touching intraday lows at US$0.6720 the AUD has found some support on the back of a weaker US jobs print and softer USD edging higher into the open and trading back above US$0.6750.
Our attentions turn now to central bank commentators with Governor Lowe set to speak this afternoon. While we don’t expect Lowe will offer much beyond yesterday’s statement and insight into RBA thinking and future rate action will be key in shaping direction.
Key MoversUS Jobs data was the major market mover through trade on Tuesday with JOLTS job openings plunging through February. The JOLTS report showed new job openings plummeted, down 632,000 in February, while January’s figure was revised lower to mark a significant miss when values against expectations. With the unemployment rate creeping higher and the quit rate falling labour market conditions are clearly easing at a faster pace than first anticipated. When coupled with Monday’s lower-than-anticipated ISM manufacturing update investors have been forced to revise expectations for fed policy. US treasury rates fell as markets are now split 50/50 on whether the Fed will hike at its next meeting in May. With the USD falling in the wake of the report the euro, GBP and JPY all gained.
Our attentions turn now to key commentary from Fed member Mester ahead of Friday’s all-important Non-farm payroll print. With average estimates pointing to a moderation in jobs growth anything short of 240K will likely amplify calls for the Fed to pause its tightening cycle and force the USD lower, while a shock uptick will afford policy makers the fodder to keep the foot on the accelerator.
- AUD/USD: 0.6650 - 0.6820 ▼
- AUD/EUR: 0.6120 - 0.6230 ▼
- GBP/AUD: 1.8280 - 1.8680 ▲
- AUD/NZD: 1.0650 - 1.0820 ▼
- AUD/CAD: 0.9020 - 0.912 ▲