RBA act decisively and delivers a dovish memo to the AUD/USD

At its first Board meeting in 2021, the RBA as expected maintained its current policy settings including the target of 0.1% for the cash rate and the yield on the 3-year bond rate, as well as the parameters for the Term Funding facility.

Charts (3)

Providing a dovish surprise, a decision to purchase an additional $100 billion of bonds once the current program expires - a month earlier and in a larger size than most were expecting.

As was as the insertion of a sentence that made note of the rise in the exchange rate which could be argued has merely tracked rising commodity prices in recent months.

“The exchange rate has appreciated and is in the upper end of the range of recent years.”

While the RBA acknowledged the better jobs and growth data of late, it was overshadowed by very explicit dovish forward guidance.

The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range.” Conditions not expected to be “met until 2024 at the earliest”

Attention now turns to the RBA Governor Lowes speech tomorrow at the National Press Club of Australia in Canberra titled “The Year Ahead” (12.30 pm AEDT) before Friday's quarterly Statement on Monetary Policy (11.30 am AEDT).

Perhaps having noted how keenly interest rate markets in the US and New Zealand have reacted to even the most subtle signs of policy normalization it appears unlikely the RBA will deviate too much from today's message in its communique later this week. That is, ultra-low interest rates are here to stay for the foreseeable future.  

The RBA’s message appears to have had the desired effect on the AUD/USD, falling from just above .7660 at 2.30 pm, down to a low near .7620. Technically, this appears to be a continuation of the correction that commenced from the January .7820 high.

Learn more about trading FX

Providing the AUDUSD remains below short-term resistance at .7700/10c the expectation is for the correction to deepen, resulting in a break of last week’s .7592 low, before a test of medium-term support .7500/.7400c.

RBA act decisively and delivers a dovish memo to the AUD/USD

Source Tradingview. The figures stated areas of the 2nd of February 2021. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.