Chart of the day - AUDUSD (06.02.2024)

10:04 AM 6 February 2024
  • The Reserve Bank of Australia (RBA) left the cash rate target unchanged at 4.35% and the interest rate on Exchange Settlement balances at 4.25%.
  • Inflation continues to moderate but remains high at 4.1%.
  • Goods price inflation has eased, reflecting improved global supply chains and reduced domestic demand for goods.
  • Services price inflation remains high due to excess demand and strong domestic cost pressures.
  • Labour market conditions are easing but still tighter than desired for sustained full employment and inflation at target.
  • Wages growth is picking up but is expected to align with the inflation target, assuming an increase in productivity growth.

At its Today’s meeting, the RBA maintained the cash rate at 4.35% and the interest rate on Exchange Settlement balances at 4.25%, acknowledging that while inflation is moderating, it remains high at 4.1%. The economic outlook is uncertain, with various global and domestic factors contributing to this uncertainty, including the situations in China, Ukraine, and the Middle East. The RBA's primary focus remains on returning inflation to the 2-3% target range, and it does not exclude the possibility of further interest rate hikes, emphasizing its commitment to closely monitoring global and domestic economic developments to achieve this goal.

During a press conference, Governor Michele Bullock maintained a neutral stance on future policy decisions, stating that nothing is ruled in or out. She emphasized that there is still work to be done to reduce inflation. The governor noted that there are signs of inflation cooling down toward the target, with risks for interest rates appearing fairly balanced.

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Australian Dollar (AUD) gains following the RBA decision and Bullock's conference, but the increases are slowing down, and currently, we even observe a slight return to declines on AUDUSD. The relatively hawkish rhetoric is unlikely to strengthen the AUD in the long run. Moreover, on the chart (H1), we can observe a head-shoulders formation, which would suggest a further decline of AUDUSD down to levels of 0.6390.

Source: xStation 5

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