We continue to see strong movement from the Australian dollar, which has gained ground for a third successive day. The currency has gained 2.2% this week, recovering most of last week’s losses.
Lowe preaches patience
After an RBA meeting that contained no surprises, the markets were hoping to gain some insights when Governor Lowe spoke at an event on Wednesday which included a Q&A session. However, Lowe’s comments didn’t really add much and were largely a reiteration of what he said at the policy meeting.
Lowe repeated that there are significant uncertainties as to recent inflationary pressures and that it was too early to determine if inflation was sustainably within the central bank’s 2%-3% target band. He cautioned the markets that the end of the bond purchase programme this month did not mean that a rate rise was imminent and remained non-commital, saying that a hike could be a year away or even longer. The markets, however, are more hawkish and have priced in a rate hike in the second half of 2022, given that inflation remains at high levels.
Lowe has been preaching patience in his messages to the markets this week, and he doesn’t appear to have abandoned his view that inflation is transient. He said on Wednesday that the jump in inflation does not require an aggressive response. This sounds very different than what we have been hearing from the Fed and the BoE, and it remains to be seen if the RBA will stand pat as the Fed and BoE tighten policy or will the RBA follow the lead of the other two central banks and raise rates.
AUD/USD Technical
- AUD/USD is testing resistance at 0.7133. Above, we find resistance at 0.7271
- There is support at 0.6913 and 0.6831
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