The Australian dollar is trading at 0.6670 in Europe, down 0.57%. Australian inflation was lower than expected, raising speculation that the Reserve Bank of Australia might pause at its April meeting.
RBA keeping eye on retail sales and inflation ahead of rate meeting
Australia’s inflation rate for February eased to 6.7% y/y, down from 7.4% prior and the 7.2% estimate. It may be too early to declare that inflation has peaked, but there’s no question that inflation is heading in the right direction. That is good news for businesses and households, which have been hurt by the double-punch of high inflation and rising interest rates.
The unexpected sharp drop in inflation likely has cemented the RBA pausing at the April 4th meeting, and that is weighing on the Australian dollar today. RBA Governor Lowe had said that this week’s retail sales and inflation releases would be key factors in the rate decision. Retail sales slowed to just 0.2% m/m in February, down from 1.2% prior and shy of the estimate of 0.4%. Weak consumer spending and falling inflation point to the economy slowing, and the RBA will likely respond with a pause, which would be the first since the rate-tightening cycle began in May 2022. The markets have fully priced in a pause at next week’s meeting, with a likelihood of around 90%.
In the US, higher rates have taken a toll on the housing sector. Pending Home Sales has recorded mostly declines over the past year, as potential home buyers are finding it more difficult to afford a new home. The indicator is expected to come in at -2.9% in February, after an unexpected jump of 8.1% in January.
- AUD/USD is testing resistance at 0.6676. Above, there is resistance at 0.6728.
- There is support at 0.6565 and 0.6402
Content 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 Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at firstname.lastname@example.org. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.