- Minutes revealed the RBA contemplated a rate hike at its last policy meeting.
- The RBA assumes inflation will not return to its 2-3% target range until late 2025.
- Markets indicate a 16% probability of an RBA rate hike in November.
The AUD/USD outlook turned positive on Tuesday as the minutes of the RBA’s latest meeting revealed that the central bank had considered raising the interest rate. However, the RBA decided to hold off until November, as it wanted more data to confirm the economic recovery. The Aussie gained strength from this hint of hawkishness, as it showed that the RBA was ready to act if needed.
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Moreover, the minutes from the October 3 policy meeting, released on Tuesday, revealed concerns about the persistence of inflation, which had not slowed as expected. It raised the possibility of an increase in the 4.1% cash rate next month.
Notably, the RBA assumes inflation will not return to its 2-3% target range until late 2025. Consumer price inflation was at an annual rate of 6% in the second quarter and 5.2% in August.
Consequently, the Board reiterated that additional tightening measures might be necessary to curb inflation. Interest rates have risen significantly, with a 400 basis point increase to an 11-year high. The RBA believed that the full impact of this tightening had yet to be fully realized. The recent uptick in petrol prices could affect inflation expectations, and progress in reducing services inflation remained slow, according to the minutes.
Meanwhile, key data, including employment figures for September and the third-quarter inflation report on October 25, will play a major role in shaping future decisions. Currently, markets indicate only a 16% probability of a rate hike in November, but this could change if inflation exceeds expectations.
AUD/USD key events today
Investors expect data from the US, including
- The core retail sales report.
- The retail sales report.
AUD/USD technical outlook: Bulls confront 0.6350 resistance.
The AUD/USD bulls are battling the 0.6350 resistance level on the charts. This move comes after the price found support at the 0.6300 level. It is the second time the price has recently tested this level and failed to go below.
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The first time, the support level led to a reversal that saw the price break above the 30-SMA and multiple resistance levels. The second attempt has also failed. However, the trend is still down as the price trades below the 30-SMA. Therefore, bears might make another attempt at 0.6300 if the SMA resistance holds.
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