Australian dollar falls despite RBA scrap target for bond yields, where are you going for AUD / USD

Australian Dollar, AUD / USD, RBA, Yield, Commodities, ASX 200 – Speech points

  • RBA left the cash rate of 0.10%, but gave up the interest rate curve control
  • Purchase of assets will remain at AUD 4 billion per week until February 2022
  • AUD / USD moved to the bottom of the most recent area. Will it break lower?

AUD / USD was lower in the wake of a less pigeon-like RBA. At one of the most anticipated monetary policy meetings of the RBA in recent times, the RBA abandoned the monetary policy control component of monetary policy.

They will no longer target 0.10% of the Australian government bond from April 2024. The cash yield was kept unchanged at 0.10% and they kept the volume of purchases of government debt assets at a rate of AUD 4 billion per week at least until mid-February 2022.

Of the bond that the bank will no longer aim for, they already own around AU $ 18 billionof the issue of 32.9 billion.

RBA Governor Phillip Lowe has previously said that there will be no increase in the cash rate before 2024. He will hold a press conference via webinar at. 5:00 GMT later today. It is possible that the timeline guidance will also be re-evaluated.

Last week, total inflation in the third quarter came in at 0.8% q / q against expectations of 0.8%. The annual overall interest rate came in at 3.0% y / y against 3.1% expected.

RBA’s preferred target, trimmed average, printed at 0.7% q / q instead of the expected 0.5%, which gave the annual reading of 2.1% y / y against 1.8% expected. It was this beat on the trimmed average that probably led to the bond market downturn.

The language of today’s statement on inflation remains relatively subdued. They do not see their preferred target for the trimmed average exceeding 2.25% by 2023.

Prior to the meeting, the S & P / ASX 200 was lower and tested trend line support, but has since stabilized.

Australian 10-year government interest rates remained stable at around 1.96% following the RBA announcement. The spread to US 10-year government interest rates remains favorable for AUD / USD.

AUD / USD AND AU-US 10 MAPS

Australian dollar falls despite RBA scrap target for bond yields, where are you going for AUD / USD

Diagram ccovered in TradingView

3rd quarter GDP, released on December 1stst, is likely to be a low figure as Covid-19 restrictions were at their most severe. Lockdown restrictions have now been eased in the 2 most populous states of New South Wales and Victoria.

As a result, the economic activity of the 4th quarter could be of greater importance to the RBA in the future.

The central bank has previously commented that the effects of the current outbreak of the Covid-19 Delta variant are seen as a short-term problem of economic disruption. In today’s statement, they acknowledged that health impacts could still affect recovery from the pandemic.

Looking ahead, there are building approvals out tomorrow, then retail sales and the trade balance to be released on Thursday.

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comment box below or @DanMcCathyFX on Twitter

Leave a Comment