RBA: Yield target successfully reinforced the bank's forward guidance about the cash rate

Anil Panchal FXStreet

“Now that the board has more experience with bond purchase programs, it is likely that, in the future, bond purchases would be preferred to a bond yield target,” said the Reserve Bank of Australia (RBA) during its review of yield target.

Additional comments

Any use of a yield target would require close attention to the lessons learned from this experience.

Yield target successfully reinforced the bank's forward guidance about the cash rate.

But its effectiveness as a monetary policy tool waned as market participants reassessed their views of the outlook for the cash rate.

While a bond purchase program offers more flexibility than a yield target, it carries other risks.

Exit experience caused some reputational damage to the bank.

Board has agreed to strengthen the way it considers the full range of scenarios when making policy decisions.

AUD/USD grinds higher

Following the RBA announcement, AUD/USD holds onto the week-start recovery moves, picking up bids to 0.6955 by the press time of early Tuesday morning in Asia.

Also read: AUD/USD hovers around 0.6950s after failures at 0.7000 ahead of RBA Lowe

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

GBP/USD surges to multi-day peaks past 1.3250

GBP/USD leaves behind Friday’s small pullback and advances past 1.3250 level, or five-day highs, on Monday. Cable’s upside follows extra losses in the Greenback, while traders continue to assess the geopolitical front and upcoming key events.

EUR/USD picks up extra pace north of 1.1400

EUR/USD extends its recovery past 1.1400 the figure as the NA session draws to a close on Monday. Indeed, the pair advances for the third straight day amid the persistent offered bias in the US Dollar. Meanwhile, market participants keep gearing up for the ECB Forum in Sintra and the release of critical US labour market data.

Gold struggles to attract investors

Gold remains under marked selling pressure, holding on just above the key $4,000 mark per troy ounce at the beginning of the week. The precious metal reverses two daily advances in a row as renewed effervescence in the Middle East revive inflation concerns and bolster Fed rate hike expectations.

Strategy unveils plan allowing Bitcoin sales to fund stock buybacks, dividends and reserves

Strategy (MSTR) has unveiled a Digital Credit Framework to strengthen the company’s financial standing. Under the new framework, the world’s largest corporate holder of Bitcoin (BTC) will pivot from its previous accumulation strategy, opting to sell BTC in order to boost liquidity, fund dividend payments, execute stock buybacks, and strengthen cash reserves.

Just like Fed, is BoJ’s independence under threat?

When talking about central bank independence, most of the focus has been on Donald Trump’s pressure on the Federal Reserve. But a similar story, a quieter one for now, seems to be happening on the other side of the Pacific: Japan’s government may be testing the Bank of Japan’s independence.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.