The RBA delivered with a 25 bps rate hike as expected but it was a change to the forward guidance that really helped to give the aussie a boost so far today. A notable change is that the central bank removed the wording that policy is not on a “pre-set course”, instead choosing to emphasise that they will still need to continue with rate hikes moving forward.
Here’s a look at the passage back in December:
“The Board expects to increase interest rates further over the period ahead, but it is not on a pre-set course. It is closely monitoring the global economy, household spending and wage and price-setting behaviour. The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.”
And this is how it looks like today:
“The Board expects that further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary. In assessing how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.”
These are subtle changes in the wording but they have a strong impact considering that we’re supposedly near the end phase of the tightening cycle.
AUD/USD moved up from 0.6920 to 0.6950 before settling closer to 0.6930 now, with the dollar also being slightly softer today after the strong gains since Friday.
The bounce so far today doesn’t say much with the technical outlook in the bigger picture still very much intact. Key daily resistance remains at the August highs at 0.7125-36 with the 0.7000 level now once again in play.
There is also near-term resistance now with the 100 and 200-hour moving averages seen at 0.7019 and 0.7050 respectively.
As for any downside move, the 200-day moving average (blue line) is one to watch for any extension to the momentum. That is sitting at 0.6807 at the moment.
While the aussie got a bit of a boost, there is still one more hurdle coming up later in the day – that being Fed chair Powell’s speech/interview. In a week where there is little in terms of data to really drive trading sentiment, that will be one to watch as it will impact the mood in broader markets before we get to the US CPI data next week.