RBA policy decision: Interest rate unchanged at 1.5%, higher AUD would slow economy

Ivan Delgado Independent Analyst

In today's Reserve Bank of Australia's monetary policy decision, as widely expected, the Central Bank decided to keep its interest rate unchanged at 1.5%, with the policy statement being interpreted as neutral.

Statement by Glenn Stevens, Governor: Monetary Policy Decision

Forecast for Australian economy largely unchanged.

Judged steady policy consistent with growth, inflation targets.

Expects economy to grow at an annual 3 pct rate over the next few years.

Higher AUD is restraining price pressures.

Increased infrastructure investment supporting the economy.

Rising AUD would slow economy.

China high debt level remains medium-term risk.

Further signs Sydney housing conditions easing.

Inflation to pick up gradually as economy strengthens.

Unemployment expected to decline gradually.

Global economy continuing to improve.

Inflation remains low, likely to stay so for some time.

Labour market has continued to strengthen.

Australia's terms of trade expected to decline over the period ahead.

Forecast remains for inflation to pick up gradually.

Key notes

AUD/USD - risk reversals flat lined, yield differential hovers near 4-month low.

AUD/USD risk reversals show lack of bias in the options market. 10Y AU-US yield spread/differential shows signs of life, but still hovers near 4-month low.

When is the RBA and how could it affect AUD/USD?

The market is looking for the RBA's take on the recent retail sales and inflation data in particular that has disappointed...

RBA policy statement

RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.

Author

Ivan Delgado

Independent Analyst

Established in the Asian continent since 2009, Ivan studied a degree in Business at the University Pompeu Fabra (Barcelona), while also earning a postgraduate degree in Business Administration.

AUD/USD sticks to positive bias above 0.7100; lacks bullish conviction

AUD/USD trades with a positive bias for the second straight day, holding above 0.7100 in the Asian session on Friday as softer US bond yields keep US Dollar bulls on the back foot. Furthermore, hawkish RBA Governor Bullock's comments boost rate hike bets and support the Aussie. However, the Fed's hawkish outlook, along with geopolitical uncertainties, limits USD losses and caps the pair.

USD/JPY approaches 158.00 as Japanese Yen resumes decline

USD/JPY is resuming its upside in the European session on Friday, refreshing two-week highs and nearing 158.00. The Japanese Yen extends losses, despite the Bank of Japan's (BoJ) expected rate hike to 1.25% and hawkish Governor Ueda's comments, as two surprise dissents against the rate hike weigh on it.

Gold tests $$4,400 as softer US bond yields cap USD gains

Gold scales higher for the second straight day and continues to hit new weekly highs through the first half of the European session on Friday, with bulls now awaiting a sustained move beyond the $4,400 mark before positioning for further gains. Retreating US Treasury bond yields keep the US Dollar (USD) uptrend capped ahead of Fedspeak and mid-tier US data.

Bitcoin extends recovery, Ethereum eyes $2,500, XRP holds $1.30

Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) extend their recovery, trading above $76,700, $2,400 and $1.300, respectively, on Friday. These top three cryptocurrencies now face key technical levels that could determine whether their recoveries extend further or pull back.

Why Bitcoin's over 30% rebound doesn't mean the bear market cycle is done

BTC has staged a strong recovery after falling to a yearly low of $57,800 in July, gaining nearly 33% and recording two consecutive months of gains in July and August. However, despite that rebound, Bitcoin remains around 40% below its all-time high, leaving one key question for traders: is this the start of a new bullish phase, or simply another recovery within a broader bear-market cycle?

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.