AUD/USD to Remain Below 0.65 As Bullock Hints on RBA Rate Cuts

The Australian dollar turned bearish at the end of December and has been declining for around 6 weeks, losing 4 cents since then. The FED doesn’t look as dovish now, while the RBA is mentioning rate cuts. Yesterday the RBA governor Bullock gave signs of upcoming rate cuts. AUD/USD tested the upside earlier this week, reaching a high of 0.6539, but couldn’t hold on to those gains and slipped back below 0.65 yesterday after Bullock’s comments. The central bank has been trying to appear hawkish, but they are giving up now and are showing tendencies to turn dovish.

The statement from the RBA said that recent inflation trends are promising, but there is still some distance to go before meeting their objective. The Board is committed to addressing the problem of inflation, especially as the cost of living continues to grow at a greater rate than in previous decades. While recent inflation data has been positive, there is still work to be done to attain the inflation objective. Even if the economy follows the central path, inflation is anticipated to remain outside the goal range for a long time.

The board recognizes the dangers of sustained high inflation, particularly the possibility that inflation expectations would rise. While additional interest rate hikes have not been ruled out, the board is committed to bringing inflation back to goal within a reasonable timeline, balancing the need to confront inflationary pressures without unnecessarily slowing down.

Reserve Bank of Australia Governor Bullock testified at the Australian Parliament’s House of Representatives Standing Committee on Economics.

Reserve Bank of Australia Bollocks From the Q&A:

• Inflation doesn’t need to be in the 2-3% band for us to think about rate cuts
• If consumption slows more quickly than expected will be an opportunity to cut rates
• We considered a range of policy scenarios at the February meeting

AUD/USD Live Chart