AUD/USD Weakens as RBA Dismisses Possibility of Rate Hike this Year
The Australian Dollar US Dollar (AUD/USD) exchange rate has tumbled this week following the Reserve Bank of Australia’s (RBA) first policy meeting of the year.
At the time of writing AUD/USD is holding steady after falling over a cent to a six-week low.
Australian Dollar (AUD) Slides as RBA Signals no Rate Hike in 2018
The Australian Dollar looks set to end session down by over a cent against the US Dollar this week as hopes of a possible rate hike in 2018 were dismissed by the RBA.
At the start of the year many analysts were suggesting that the RBA could follow other major central banks this year in tightening its monetary policy.
However the RBA signalled this was highly unlikely following the conclusion of its first policy meeting of 2018 earlier this week.
Putting the final nail in the coffin was the RBA’s quarterly statement on Friday in which Governor Philip Lowe made it very clear that the bank was not in any rush to hike rates this year.
Lowe closed his speech on Friday by saying;
‘Our circumstances are a little different. We are still some way from what could be considered full employment and our central scenario for inflation is for it to remain below the midpoint of the medium-term target range for the next couple of years.’
‘Given this, the Reserve Bank Board does not see a strong case for a near-term adjustment in monetary policy.’
US Dollar (USD) Slips as US Government Shuts Down… Again
Despite making solid gains throughout the week, the US Dollar was forced to go on the defensive during the Asian session as the US government failed to pass a new budget.
This has prompted the second shutdown of the US government so far this year.
While is impact on currency markets was relatively minor it is likely to prompt further concerns over political uncertainty in Washington.
AUD/USD Forecast: Australian Unemployment to Tumble?
Looking ahead to next week’s session the AUD/USD exchange rate may find some solid gains next week on the back of Australia’s latest labour report.
Economists forecast that figures will show that the domestic unemployment rate fell from 5.5% to 5.3% in January, its lowest rate since 2013, likely prompting the Australian Dollar to soar.
Meanwhile the focus for USD investors next week will be on the latest US CPI figures, with any uptick in inflation likely to support the chances that the Federal Reserve will accelerate the pace of monetary tightening this year.