The Reserve Bank's Dovish Comments Are Pushing The AUD Higher After A Rate Cut

The AUD has climbed to a three-day high since the Reserve Bank released the outcome of its August board meeting this afternoon.

The board’s decision to cut rates to a record low of 2.5% surprised no one. But governor Glenn Steven’s silence around any further easing raised a few eyebrows.

Via, here’s what happened to the AUD, which was trading at $US0.8990 just before 7pm AEST:

Westpac chief economist Bill Evans said governor’s decision to move from a consistent easing bias to a neutral bias was the most significant aspect of today’s announcement.

UBS economists Scott Haslem and George Tharenou said they still believed that the RBA planned further easing but was “on hold … in data-watching mode” for several months. “

Further cuts were unlikely in September and October – close to the Federal Election – and there was a “better than even chance” that the RBA would go no lower than the current 2.5%, UBS reported, highlighting the possibility of US QE tapering and improvements in markets in the US, Europe, UK and Japan.

HSBC chief economist Paul Bloxham also questioned if the RBA would cut rates further, noting that Stevens’ statement was “did not explicitly indicate that the inflation outlook provided ‘scope’ for further easing from here, as previous statements had done”.

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