Australia Lowers Rate More Than Expected
Australia Lowers Rate More Than Expected
Australia Cash Rate Actual 5.25%, Expected 5.50%, Previous 6.00%
Release Explanation: The interest rate sets the tone for mortgages, commercial loans, and all economic lending criteria. This is the single most important reason why currencies are bought and sold. A strong interest rate and robust business cycle will attract foreign investment. A weak interest rate will normally lead to a weak currency as investors swap the higher yielding currency for a profit.
Trade Desk Thoughts: The Reserve Bank of Australia has cut 75 basis points from its cash rate effective 5 November. The bank cited the slowing global economy as the main instigator. Also, Governor Stevens stated that ‘Global equity prices have been volatile and fell further in net terms, and there have been significant exchange rate movements, including a sharp depreciation of the Australian dollar.’ The Governor also said that the board will continue to make adjustments to promote growth while bringing inflation down to the 2-3 percent target range. Most analysts had been expecting a cut of 50 basis points. This is the third monthly meeting at which the bank has cut rates.
Forex Technical Reaction: The Australian dollar has fallen below its 20 day SMA to just above TheLFB S1 pivot point at .6630.
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