Rate Hikes Off The Table For Now
The Australian Dollar has been a little weaker over the European session so far on Tuesday following the February RBA meeting overnight. The RBA held off from announcing any rate hikes though the bank did outline that its pandemic-driven stimulus program would now cease. So far so good, this was broadly what the market was expecting. However, Aussie bulls were left a little disappointed by the tone of the meeting statement which appeared to pour cold water over the heads of those looking for the RBA to bring its rate hike projections forward.
Inflation Not There Yet
The RBA has previously stated that it will not be looking to move on rates until 2024 at the earliest. This is in line with the bank’s projections for when inflation will return to its target band. However, in light of soaring inflation over recent months and with optimism growing in light of fading omicron risks, the market was looking for the RBA to take a more hawkish turn, in line with what we’re seeing elsewhere (Fed, BOE, BOC etc). However, the bank judged that "While inflation has picked up, it is too early to conclude that it is sustainably within the target band."
So, for now, the RBA sticks to it prior projections and looking ahead, the RBA expressed concern over how consistent the pickup in inflation is likely to be, given the ongoing supply side issues. With this in mind, the key to gauging the likelihood of rate hikes being brought forward, will be in monitoring Aussie inflation over coming months.
Technical Views
AUDUSD
Despite broader weakness, AUD is trading well against USD currently given the recovery in risk sentiment and weaker USD this week. The recent test of the .7009 level saw strong buying kick in and, with plenty of bullish divergence in momentum studies, we could see a double bottom forming here. Bulls can look for a break of the .7112 level targeting a move up to .7243 initially.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.