The Australian dollar rose today after the outlook for the monetary policy of the Reserve Bank of Australia improved. The general market sentiment improved as well, also providing support to the Australian currency. The Aussie gained against all other most-traded currencies, though by now it has retreated from the day’s highs.
Previously, market participants were expecting that the RBA will cut its main interest rate by 25 basis points to 0.5% tomorrow. But now the consensus is that the central bank will keep monetary policy unchanged. Yet that does not mean that there will not be cuts down the line. The Westpac Banking Corporation predicted that the RBA will the benchmark rate unchanged tomorrow but will cut it two times later — one in April and one more time in August.
Macroeconomic reports released in Australia today were not particularly good. The Australian Industry Group Australian Performance of Manufacturing Index dropped from 48.3 in December to 45.4 in January — the lowest level since 2015. The decline below the neutral 50.0 level means that the industry was contracting at an accelerated pace. The Australian Bureau of Statistics reported that the number of building permits fell by 0.2% in December on a seasonally adjusted basis, though the decline was far smaller than 5.0% predicted by experts. The number of ANZ Australian Job Advertisements increased by 3.8% in January following a 5.7% drop in December. The RBA reported that the Index of Commodity Prices declined by 3.6% in January from a year ago. The main contributors to the decline were lower coal, LNG and alumina prices.
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Australian Dollar Gains as No Rate Cut Expected in February
