The Australian dollar has posted slight gains on Wednesday, recovering the losses seen on Tuesday. Currently, AUD/USD is trading at 0.7322, up 0.31% on the day.
RBA says easing yes, negative rates no
The Reserve Bank of Australia released the minutes of its November policy meeting on Tuesday, but the Australian dollar’s reaction has been muted. The policy meeting was a live one, as the RBA sliced rates from 0.25% to 0.10%, a historic low. The RBA opted not to cut rates in October, as the policy meeting came out on the same day as the government’s budget release. At the November meeting, in addition to lowering interest rates, the RBA also introduced QE for the first time in its history, announcing the purchase of $100 billion of government bonds over the next six months.
The minutes indicated that the central bank continued to have its thumb on the easing button and was prepared to provide additional stimulus if necessary. This is not simply a case of the use of cliche language that we see so often from central banks, as the RBA showed at the November meeting that it meant business when it comes to providing further easing.
What was striking in the minutes was the clear manner in which the bank essentially ruled out negative rates, a scenario which had been bandied about by bank members. The minutes stated that taking rates negative was not “sensible” and that further easing would involve bond purchases. This will no doubt be a source of relief to investors with assets in Australian dollars as well as commercial banks, who viewed the possibility of negative rates with apprehension and will be delighted that this idea has been put on the shelf to collect dust.
AUD/USD Technical
- AUD/USD is pressing on resistance at 0.7332. The next resistance line is at 0.7395
- We find support at 0.7214. The next support line, which is at 0.7159, has held since November 5th.
- The pair touched the 10-day MA line earlier in the day. Currently, the pair is situated just above this line
