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The Reserve Bank of Australia (RBA) stuck to loose policy for longer like other major central banks. The Australian dollar weakened modestly following the policy update, resulting in the AUD/USD rate falling back towards the 0.7600-level. At the same time, the aussie has extended its recent underperformance against the kiwi, with the AUD/NZD rate falling back towards the 1.0600-level, per MUFG Bank.

Key quotes

“We continue to view the recent pullback for the Aussie and global equity markets as a short-term correction rather than the start of a more sustained reversal lower. We remain optimistic that the strengthening outlook for global growth and continuation of loose global monetary and fiscal policies will create a supportive environment for higher commodity prices and a stronger aussie in the year ahead.”

“At best the RBA’s decision to extend their QE programme overnight by a further AUD100 B will put a dampener on further gains. The new purchases will extend the QE programme until September after it had been due to expire at the end of April.”

“The RBA attempted to keep downward pressure on short rates by reiterating that it still does not plan to raise rates until 2024 at the earliest despite the stronger than expected economic recovery which prompted material downward revisions to the unemployment rate forecasts (6.0% at end of 2021 & 5.5% at end of 2022).” 

“The overall message from the RBA is that it will be slow to tighten policy as the economy recovers. To do otherwise while other major central banks are still easing would encourage an even stronger aussie.”