The Australian dollar surged today after the Reserve Bank of Australia refrained from lowering interest rates. Such decision surprised Forex traders as they had been sure that the central bank would cut borrowing costs and that cut was priced in.
The RBA left its main interest rate at 3.25 percent at today’s policy meeting. The central bank mentioned downside risks that were caused mainly by the situation in Europe, but said that “risks elsewhere seem more balanced”. The RBA thought that Australia’s “growth has been running close to trend over the past year”. At the end of the policy statement, Glenn Stevens, the RBA Governor, concluded:
At today’s meeting, with prices data slightly higher than expected and recent information on the world economy slightly more positive, the Board judged that the stance of monetary policy was appropriate for the time being.
Such decision was a great surprise for the FX market as previously Stevens was rather dovish and a rate cut was considered to be almost guaranteed. It is true that some macroeconomic data was positive recently. Yet there is plenty of negative data, including the report later this week, which is expected to show that Australia’s employment growth stalled.
AUD/USD jumped from 1.0362 to 1.0427 and AUD/JPY soared from 83.19 to 83.65 as of 15:27 GMT today. EUR/AUD dropped from 1.2342 to 1.2270 and its daily low of 1.2240 was the lowest since September 7.
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