The Australian dollar is turning heads, as AUD/USD has jumped a massive 1.27% today. In the European session, the Australian dollar hit 0.7639, its highest level since June 2021.
RBA says audieu to ‘patience’
If I had to pick a word that encompassed RBA Governor Lowe’s monetary stance, it would be ‘patience’. Lowe has preached patience to the impatient markets for many months, and previous rate statements have stated that the RBA was willing to be “patient” before raising the cash rate. The markets pounced on the slight change in Lowe’s rate statement, noting the absence of the word “patience”.
Lowe has until now tried to dampen expectations of a rate hike, although the markets have held to the belief that a series of rate hikes are coming. The Governor has previously insisted that wage growth would have to rise above 3% before the Bank was convinced that high inflation was sustainable. The rate statement noted that wages were rising in “some areas”, and that wages were expected to rise.
Lowe has retreated from his previous position and now appears amenable to raise rates as long as inflation and wage growth are moving higher. The apparent hawkish pivot, or at least “less dovish” stance from the RBA has sent the Aussie soaring almost 200 points today.
As for the timing of a rate hike, a move at the next meeting in May is unlikely, as a federal election is likely to be called in May and the RBA would prefer to avoid making any major moves during an election campaign. This points to the June meeting as the most likely date for a rate hike. The markets have priced in an 84% chance of a 0.25% hike in June, and close to a 50% likelihood of a 0.50% hike, with up to seven more increases before the end of the year.
- AUD/USD has broken above resistance at 0.7627. Above, there is resistance at 0.7771
- 0.7458 is the first line of support. Below, there is support at 0.7397
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