AUD/USD plunged after the Reserve Bank of Australia (RBA) dropped its tightening bias. Economists at BBH analyze the pair’s outlook.
RBA left the cash rate target at 4.35%
The RBA kept the cash rate target at 4.35% (no surprise) but unexpectedly dropped its tightening bias. The RBA tweaked its policy guidance from warning that’a further increase in interest rates cannot be ruled out’ to ‘the Board is not ruling anything in or out’. Accordingly, the tone of the RBA statement was more cautious noting that wage growth ‘appears to have peaked’ and ‘household consumption growth remains particularly weak amid high inflation and the rise in interest rates’.
AUD/USD can break below its February low (0.6443) if, as we expect, the Fed turns less dovish on Wednesday.
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