Australian Dollar Outlook: RBA Clips Dollar’s Wings

Forecast for the Australian Dollar: Bearish

  • The relative rate adjustments last week caused the Australian Dollar to decline.
  • Compared to the Fed and BoE, the RBA’s most recent rate boost was insignificant.
  • If China reopens, the RBA’s approach to CPI may be put to the test.

After the Reserve Bank of Australia (RBA) increased the cash rate target last Tuesday by 25 basis points (bp), as expected, to 2.85% from 2.60%, the Australian Dollar fell.

Some economists had hoped for a 50 bp increase. The shift away from aggressive monetary policy tightening has, among other things, widened the interest rate differential in the US Dollar’s favor.

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