Australian dollar eyes RBA minutes

The Australian dollar has started the trading week with considerable losses. In the North American session, AUD/USD is trading at 0.6482, down 0.50%.

Will RBA minutes provide any insights on rate path?

Investors are eagerly awaiting the minutes from the Reserve Bank of Australia’s meeting last month. At the meeting, the central bank maintained the cash rate at 4.35% for a third straight time. The pause was expected and what was of more interest was the slight change in language in the rate statement. The February statement said that “a further increase in interest rates cannot be ruled out” and this was changed to the “Board is not ruling anything in or out” at the March meeting.

The markets jumped on the change in language, viewing it as a signal that the RBA had removed its hiking bias. This sent the Australian dollar sharply lower in the aftermath of the meeting, although it fully recovered by the next day.

The RBA statement said that “encouraging signs that inflation is moderating”, but the RBA remains concerned that inflation still remains high and is worried about the uncertain economic outlook, both domestically and abroad. Household consumption remains weak and growth has slowed and China’s economy remains a major concern.

Will the minutes indicate that the RBA is becoming more dovish about its rate path? If so, we could see the Australian dollar again lose ground on expectations that the central bank is moving closer to a rate cut. The RBA hasn’t yet laid to rest the possibility of another rate hike, although that seems an unlikely scenario barring an unexpected resurgence in inflation. The rate-tightening cycle is likely over and done with and the markets will be looking for some clues about a possible rate cut in the RBA minutes.

AUD/USD Technical

• AUD/USD tested resistance at 0.6519 earlier. Above, there is resistance at 0.6554
• There is support at 0.6480 and 0.6445

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