Aussie gives up two-month high after RBA rate cut
The Australian dollar fell in Asian trade on Tuesday away from a two-month high against the US dollar, and about to mark the first loss in four days on profit-taking after the Reserve Bank of Australia announced its policy decisions.
The Reserve Bank of Australia voted to cut the cash rate by 25 basis points to 4.10%, marking the first such rate cut since the Covid 19 pandemic in March 2020.
The RBA said today’s decision reflects progress in containing inflation, but the Board will remain cautious about further policy easing.
The Price
The AUD/USD pair fell 0.35% today to 0.6335, with a session-high at 0.6368.
The pair rose 0.1% yesterday, marking the third profit in a row, and hitting a two-month high at 63.74 cents as the risk appetite improved.
RBA
The Reserve Bank of Australia went ahead with executing its first rate cut since early 2020, bringing rates to 4.10%.
The decision matches market expectations, and comes after nine consecutive meetings of no changes in rates.
The RBA noted that upward inflationary risks have reduced, and there are signs that economic contraction could happen slightly faster than expected, prompting the decision to cut rates.
The RBA expressed confidence that inflation will sustainably move towards the 2-3% target in upcoming months, while continuing to rely on data and projections to decide on future policies.
Bollock
RBA Chief Michelle Bollock cautioned that the rate cut today doesn’t mean additional rate cuts soon.
She warned against market presumptions about rate cuts, as the fight against inflation isn’t won yet.
Australia’s Government
Australia’s Treasury Minister James Edward said that the RBA rate cut today is very good news for millions of Australians, and a sign of confidence that the worst of inflation has been overcome.
Australian Rates
Following today’s meeting, the odds of an RBA 0.25% rate cut in April stood at just 20%, and in May at a full 100%.
RBA cuts interest rates for first time since March 2020
The Reserve Bank of Australia voted to cut the cash rate by 25 basis points to 4.10%, marking the first such rate cut since the Covid 19 pandemic in March 2020.
The decision matches market expectations, and comes after nine consecutive meetings of no changes in rates.
It comes as inflationary pressures recede and the labor market slows down, with upcoming rate decisions relying on economic developments.
Yen climbs after GDP growth data
The yen surged on Monday against most major rivals following Japanese growth data.
Earlier government data showed Japan’s GDP growth at 0.7% in the fourth quarter of 2024, while analysts expected a 0.3% rise.
On trading, the USD/JPY pair fell 0.5% as of 21:14 GMT to 151.4.
US Dollar
The dollar index rose 0.1% as of 20:57 GMT to 106.7, with a session-high at 106.9, and a low at 106.7.
The US stock and bond markets are closed today for the Presidents Day bank holiday.
Wall Street will resume trading tomorrow as investors analyze the latest developments in the tariff war that US President Donald Trump started in recent weeks.
President Trump announced plans to increase tariffs on other countries in proportion to their own tariffs on US imports, with the aim of squashing trade imbalances with US trade partners.
Trump threatened tariffs of upwards to 100% on BRICS countries, including Brazil, China, and India.
White House officials said the tariffs won’t get into immediate effect, and would give countries the chance to negotiate new conditions.
Wall Street closed for Presidents Day holiday
The US stock and bond markets are closed today for the Presidents Day bank holiday.
Wall Street will resume trading tomorrow as investors analyze the latest developments in the tariff war that US President Donald Trump started in recent weeks.
US stock indices scored weekly gains last week as investors assessed tariff developments and inflation data.