The Australian dollar is showing little movement in the Wednesday session. Currently, the pair is trading at 0.7706, down 0.08% on the day.
Lowe says rates to stay low
Australia’s economy has recovered from the Covid-induced downturn more quickly than expected. The country has contained Covid quite well, and global demand for Australian exports is growing. The impressive economic recovery has led to speculation that the RBA could raise interest rates next year or early 2023. The central bank has trimmed rates to a record low of 0.10% and has a QE program of A$200 billion currently in place.
RBA Governor Lowe sought to dampen speculation over a rate hike, saying that there would be no hikes before wage growth lifted inflation to the bank’s target of 2-3%. Lowe said that this would require wage growth, currently at 1.4%, to climb above 3 per cent. In order for that to happen, unemployment would need to fall to 4%, down from the current 6.4%. Although the RBA could choose to raise rates even if these targets were not met, his comments served notice to the markets that higher rates remain a long, long way off. Lowe was clear in this message, saying in the bank’s assessment, “the cash rate is very likely to remain at its current level until at least 2024.”
Sandwiched in between Lowe’s comments were solid economic releases, reiterating that the economy is pointed in the right direction. The NAB Business Confidence index rose from 10 to 16 in February, its highest level since 2010. As well, Westpac Consumer Sentiment rose to 111.8 in March, up from 109.1 beforehand. The index is now just shy of the December read of 112.0, which was a 10 year high.
AUD/USD faces resistance at 0.7805, followed by resistance at 0.7930. On the downside, there is support at 0.7589. If this line fails, the pair could fall sharply, with the next support level at 0.7498
For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/
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