Early on Tuesday morning, the Board of Governors of the Reserve Bank of Australia announced their decision to maintain the interest rate in the country unchanged at the current rate of 1.00 per cent. The market was already expecting such a course of action on the part of the RBA, which managed to boost investors’ confidence by reassuring them that the Australian economy is remaining resilient to the downside risks resulting from the heightened global trade uncertainties.
In the post-decision monetary policy statement, the Board of Governors acknowledged the downside risks to growth, namely the low borrowing rates in many countries including Australia; the global trend of low-interest rates in the top economies, and also the protracted subdued inflation. These conditions have been attributed as the primary causes for the lesser generated growth in the first two quarters than initially expected.
“Looking forward, growth in Australia is expected to strengthen gradually to be around trend over the next couple of years. The outlook is being supported by the low level of interest rates, recent tax cuts, ongoing spending on infrastructure, signs of stabilisation in some established housing markets and a brighter outlook for the resources sector.” [source]
The prevailing expectations are for the Australian economy to gradually recover; for the growth rate to pick up by the end of the fiscal year and to continue to do so in the foreseeable future. Thus, the investor confidence is expected to start appreciating gradually as well, which would have positive ramifications for several industries and markets, namely for the Australian dollar which until recently has been trading at a huge discount.
The AUDUSD appreciated with 0.68 per cent on Tuesday after the monetary policy statement was released, and in doing so, the price of the pair managed to get back within the boundaries of the previously outlined range. The AUD/USD is enjoying its third consecutive day of gains, and the price is currently testing the upper-boundary of the range at 0.68150. Should the pair manage to break out above that resistance, the price could be said to have broken above the Accumulation's area, and the formation of a new markup stage could be attempted.
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