AUD/USD slides after dovish RBA minutes

The Australian dollar has posted sharp losses on Tuesday.  AUD/USD is trading at 0.6647 in the North American session, down 0.77%.

Minutes – RBA considered pause

The markets were hoping that the RBA minutes would provide clues as to when the RBA might wind up its tightening cycle, and the RBA appeared to deliver the goods. The minutes indicated that the central bank considered pausing its tightening in December, although in the end board members voted for a third-straight hike of 25 basis points. This marked the first time since the tightening cycle started in May that board members made a case for no change and indicates that the current cycle may be close to its end. The minutes noted that according to the Bank’s forecasts, inflation would not return to the 2% to 3% target for several years, and members also stated that no other central bank had yet paused.

The RBA is being careful not to show its hand, with the minutes stating that there was “considerable uncertainty” in the economic outlook and that rate hikes were “not on a pre-set path”. With the next rate meeting not until late February, it’s wait-and-see time for the RBA. Inflation remains the RBA’s number one priority, but policy makers are aware of the pain that high inflation and rising interest rates are causing to businesses and households. The RBA would love to pause, but it will need to first see evidence that inflation is definitely on the way down. If the RBA ends tightening too early, there is the danger of a price-wage spiral, which would greatly complicate the battle against inflation.

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AUD/USD Technical

• AUD/USD has support at 0.6611 and 0.6535
• There is resistance at 0.6752 and 0.6828

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