- AUD/USD jumps 35 pips as RBA met dovish expectations.
- The central bank cut rates by 25 basis points and announced a bond purchase program.
- Australia’s 10-year yield surged after the rate cut decision.
AUD/USD pair added 35 pips and recovered to 0.5577 after the Reserve Bank of Australia cut rates by 25 basis points to a new record low of 0.25%, as expected.
The central bank also announced a government bond purchase program, which is will commence from Friday. The bank will be buying bonds in the secondary market.
With coronavirus pandemic threatening to push both the global and Australian economy into recession, the RBA was widely expected to hit the zero lower bound and start a bond purchase program to pump liquidity into the system.
The dovish move was priced in advance, as evidence from AUD/USD’s slide from the high of 0.6685 seen on March 3 to lows near 0.545 seen ahead of the central bank’s decision.
As a result, the Aussie dollar has bounced, possibly on “buy the fact” trade and could continue to gain altitude during the day ahead, more so, as Australia’s 10-year government bond yield surged by over 100 basis points in the last few minutes.
Technical levels