RBA keeps rate at 3.25% – Reaction

RBA choose to keep rates, going against analysts’ estimate forecasting a 25bps cut. Understandably price rallied, breaking 1.04 and previous swing high of 1.042 in the process.

30 Mins Chart

In the statement released, Glenn Stevens mentioned that inflation was higher than expected, with indicators suggesting that growth is stable, similar to previous year trends. The outlook out China from the point of RBA is also brighter, describing Chinese economy as having “stabilized”, with United States showing “moderate growth”.

The biggest kick against the bears would be the final paragraph’s opening sentence: “Further effects of actions already taken to ease monetary policy can be expected over time”. This suggest that RBA most likely will refrain from cutting rates further in the near future as the rate cuts continue to work through into the entire economy.

Daily Chart

Trading range between 1.02 – 1.06 remains in play. Should price maintain above the 1.04 midpoint, we could see bulls potentially aiming for 1.06 once more. Failure to hold onto 1.04 opens up downside 1.02 once more.

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