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AUD/USD soars after RBA trims rates

The Australian dollar has climbed sharply on Tuesday. Early in North American trade, AUD/USD is trading at 0.7135, up 1.18% on the day. If the pair can consolidate these gains, it will mark the pair’s best one-day performance since late August.

RBA cuts rates, introduces QE

It has been a spectacular day for the Australian dollar, which is up over 1 percent against the US dollar. The RBA rate cut was widely expected, but the same cannot be said about the Aussie’s huge gains. The RBA trimmed the Cash Rate from 0.25% to 0.10 per cent. This was the first rate move since March, when the RBA slashed rates in response to the economic downturn caused by the Covid-19 pandemic. The bank went a step further in easing monetary policy at the Tuesday policy meeting, by implementing a QE program for the first time ever. Under the program, the RBA plans to purchase A$100 billion worth of government bonds over the next six months.

With the RBA lowering rates to a record low, why is the Australian dollar rallying? The answer could be that commodity-bloc currencies, such as the Aussie, are riding on the market belief of a “blue wave” in the US election, meaning that the Democrats will sweep the presidency and both houses of Congress. In this scenario, a “buy everything” mood could weaken the US dollar as investors purchase equities and other assets. Since the RBA cut was widely expected, investors paid minimal attention to the move and the Aussie has shot up on Tuesday. Of course, we could see further movement from AUD/USD, when results begin to come in from the US election on Tuesday.

Dollar volatility likely around election [1]

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AUD/USD Technical

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher [5]

Market Analyst at OANDA [6]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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