The Reserve Bank of Australia stood pat on rates yesterday and maintained a dovish bias around its rate path. After last month's hike, policymakers have room for a cautious approach. Although still far from the 2%-3% target, inflation has moderated substantially, while the labor market is cooling, despite being tight.
The central bank found that the economy was "stronger than expected" in the first half of the year, but today's weak print raises the bar for further monetary tightening. GDP grew by just 0.2% q/q in the third quarter, marking the slowest pace since the contraction in the same period two years ago.
AUD/USD slumped on Tuesday after the RBA's dovish hold and is in risk of breaching the critical 0.6529-10 confluence, which could shift bias to the downside. However, it bounces back today, defending the aforementioned key tech level. Above it, the Aussie stays in the driver's seat with the ability to set higher highs (0.6691).
The pair rallied last month on optimism for a Fed pivot and this theme can continue to support it, since it harms the greenback. Markets believe that the terminal rate has been reached and price in 125 basis points of cuts in 2024, staring in March, according to CME's Fed Watch Tool . Investors now turn to Friday's NFPs, which can determine the trajectory of the pair.
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
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