The Australian dollar hit new 2009 lows against the US dollar as both countries seem to go in different directions.
AUD/USD reached a low of 0.7827, breaking below the 0.7850 line that was the previous support line.
The Federal Reserve made no earth shattering changes to its statement: it still sees quite a few positives in the US economy while calling for patience regarding normalizing monetary policy – raising the interest rates.
While Yellen and co. did express some worries about international developments, this was quite sidelined by the upbeat wording on the solid economy and strong job growth.
In New Zealand, Australia’s neighbor, the tone was different: the RBNZ switched to neutral stance: a rate hike is no longer on the cards, and this makes sense after the fall in inflation.
Australia did not incur a drop in inflation: the trimmed mean CPI actually beat expectations and y/y it remains above 2.2%. However, when everybody is busy in a currency war, Australia probably cannot stay behind.
Speculation is mounting in the Australian press about a rate hike as soon as February 4th. Will the RBA slash 25 basis points and set the interest rate at 2.25%? They could do it now or in March.
Opinion: AUD/NZD: RBA Rate Cut Speculation Builds as RBNZ feeds the bears – RBS
Here is the chart:
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