The Reserve Bank of Australia left the interest rate unchanged but made a significant change about its comments regarding the Australian dollar. It no longer sees “further depreciation” as “both likely and necessary” but rather acknowledges the recent fall, or “adjustment” as it calls it.
This sent AUD/USD to leap around 100 pips and hit a high of 0.7384. Has the Aussie bottomed out?
The interest rate was cut twice this year and hit a new historic low of 2%. The statement does not hint of another cut coming soon, but Glenn Stevens and his colleagues already surprised markets.
Should the Aussie recover too much, will he cut the rates again? Not necessarily. By removing the wording about AUD strength, Stevens has taken back this rhetoric weapon. It is back in the shed and can be used once again in case the Aussie gets too strong.
Earlier, data coming out of Australia beat expectations: retail sales rose 0.7% in June, ahead of 0.5% expected and the trade balance deficit was smaller than predicted, just under 3 billion A$.
More: AUD/USD: A Function of One Variable
Here is how the leap looks on the chart:
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