AUD declines after RBA decision 🔎

• The Reserve Bank of Australia (RBA) has kept interest rates unchanged at 4.10%
• The RBA aims to balance supply and demand in the economy and assess the impact of previous rate increases
• Inflation remains a concern, and the RBA is closely monitoring labor costs and price-setting behavior

The RBA has decided to maintain the current interest rates (OCR) at 4.10% given the prevailing uncertainty in the economic outlook and the need to evaluate the effects of the previous interest rate hikes. The focus is on achieving a sustainable balance between supply and demand while evaluating the effects of previous rate adjustments. Inflation remains a priority, and the RBA is closely watching labor costs and price-setting practices to manage the situation effectively.

Excluding April and the current July decision, the RBA has implemented 12 consecutive rate hikes since it commenced its monetary policy tightening in May 2022. However, the recent pause in rate increases is believed to be temporary, as both economists and markets anticipate that the central bank will raise rates further by at least 0.25 percentage points to 4.35% in the upcoming months before reaching the peak.

Key information:

• RBA aims to return inflation to the target range within a reasonable timeframe
• The Australian economy has experienced a slowdown, and labor market conditions, although slightly eased, remain tight
• RBA still expects the economy to grow as inflation returns to the target range
• Household consumption is facing uncertainties due to higher interest rates and cost-of-living pressures
• Global economic uncertainties are expected to impact the Australian economy's growth rate in the coming years
• The RBA is committed to taking necessary actions to achieve the inflation target and will closely monitor economic conditions and forecasts

After the meeting, RBA chairman Philip Lowe emphasized in the statement that the RBA recognizes the potential necessity of implementing tighter monetary policies to achieve the desired inflation level within a reasonable timeframe. However, the decision to tighten policies will be based on how the economy and inflation progress over time. By maintaining interest rates unchanged, the RBA allows itself additional time to assess economic conditions, anticipate future prospects, and evaluate potential risks. The RBA will closely monitor global economic developments, trends in household spending, as well as inflation and labor market forecasts.

Following the announcement, the AUDUSD experienced a notable decline, reaching a key support level at 0.664. However, the price subsequently rebounded, returning to its previous level around 0.667. Currently, the AUDUSD is trading around this level. The next level of resistance is anticipated to be around 0.670. AUDUSD, H1 interval, source xStation 5