Aussie jumps after RBA hike

Aussie jumps after RBA hike

Time Stamp: February 7, 2023 5:46 AM
Source Node: 1943819

The Australian dollar has posted strong gains on Tuesday. In the European session, AUD/USD is trading at 0.6934, up 0.75%.

RBA expected to raise rates

There were no surprises from the RBA, which raised rates by 25 basis points, for a record ninth straight hike. This brings the cash rate to 3.35%, its highest level since 2012. The RBA has settled into a tightening policy of small but steady increments and has raised rates by 25 bp four consecutive times. RBA Governor Lowe’s rate statement after today’s meeting was more hawkish than expected, surprising the markets and giving a big boost to the Australian dollar.

Lowe said that “further increases in interest rates will be needed over the months ahead”, a signal that he was prepared to tighten by 50 bp and perhaps even more in order to tame inflation. Lowe added that this period of high inflation was only temporary, but with inflation hitting 7.8% in Q4, its highest since 1990, I wonder just how many investors would agree that high inflation is temporary.

The RBA’s steep rate-hike cycle is yet to tame inflation but it is taking a bite out of economic activity. Earlier in the week, retail sales slumped by 3.9% and January’s Manufacturing and Services PMIs both indicated contraction. Fortunately for the RBA, the employment market remains robust, allowing the central bank to continue raising rates.

The US dollar received a much-needed boost from the US employment report on Friday, and a host of Fed speakers this week could extend the dollar’s rally. The Fed members are expected to reiterate the “higher for longer” stance that the Fed has been pushing, and the markets will be listening closely as Fed Chair Powell delivers remarks in Washington later today.

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AUD/USD Technical

  • 0.6962 is a weak resistance line, followed by 0.7080
  • 0.6841 and 0.6761 are providing support

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher
Kenny Fisher

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