The Australian dollar is back above 74 cents in the wake of the RBA decision and governor’s statement that suggests there is little chance of a near-term rate cut in Australia.
Forex traders have focussed on the final statement of the governors paragraph — where the RBA’s bias usually is outlined — and found a strongly worded conclusion to what can only be read as a fairly optimistic statement.
The governor concluded his remarks saying (our emphasis):
Taking account of the available information, and having eased monetary policy at its May meeting, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and inflation returning to target over time.
There is little room for misunderstanding that message.
Ivan Colhoun, the NAB’s chief economist for markets, told Sky Business soon after the release that he had been watching to see if, like 2015, the RBA put the bias back in its statement the month after the easing.
The fact that it did not sends a strong signal.
With the US dollar under a little pressure and the RBA signalling no imminent move forex traders have moved to price out the narrowing differential in rates that they had expected and that has helped the Aussie to 0.7420 — the highest level since the release of the RBA’s – now confusing – Statement on Monetary Policy on May 6.