Aussie up slightly, RBA minutes in focus

The Australian dollar has posted slight gains on Monday, continuing the trend we saw at the end of the last week. Currently, AUD/USD is trading at 0.7777, up 0.20% on the day.

RBA minutes next

The RBA releases the minutes of its February policy meeting later on Tuesday (00:30 GMT). The minutes will provide details of a most interesting meeting, which disappointed investors as the AUD/USD headed lower after the meeting.

There had been speculation that the central bank might take a less dovish stance at the meeting, given the strong performance of the Australian economy, which has rebounded well from the Covid crisis. However, the RBA not only maintained rates at an ultra-low level of 0.10%, but somewhat surprisingly opted to extend the bank’s QE scheme for another six months. The current programme was due to end in April, but will now last until October.

The move put the RBA in line with other major central banks which have implemented QE, and also is intended to dampen the high-flying Australian dollar.  The RBA announced that it will extend the scheme for another six months, with bond purchases of A$100 billion. The rate statement acknowledged the improvement in the labor market, but also noted that inflation remains below the target of 2-3%. The bank also stated that it did not expect to raise rates prior to 2024, as policymakers are following the Federal Reserve’s lead and have poured cold water on any speculation of tapering QE anytime soon. Since the rate decision, RBA Governor Lowe has stated that interest rates will remain low for “quite a while yet”, another signal to the markets that the central bank will remain in dovish mode for the near future.

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AUD/USD Technical

• 0.7805 is a weak resistance line. The next resistance line is at 0.7848
• There is support at 0.7685, followed by support at 0.7608
• The 50-day moving average (MA) is situated at 0.7615

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