RBA leaves door to further rate cut wide open

As the majority of analysts believed that the Australian central bank left its key rate unchanged at 2.00%. Overall it seemed quite optimistic as regards the Australian economy. There was particular reference to the positive developments on the labour market. For the market this optimism on the part of the RBA was a reason to trade AUD-USD at higher levels. And indeed at first glance it would seem that the RBA is signalling that it will maintain its neutral approach. 

However, in the current environment where almost all G10 central banks are trying to promote a weak currency or to achieve it with the help of concrete measures, this would be a fatal signal for AUD. And so the RBA ensured it was going to keep the door open for further rate cuts. Should the inflation outlook deteriorate further additional monetary policy easing would probably be called for, the RBA signalled. 

In order to make things quite clear for all those market participants who have euphorically been buying AUD this morning: this is a discreet RBA warning against trading AUD at excessively high levels. After all a strong AUD would put pressure on what already are disappointingly low inflation levels which would then provide a reason to cut interest rates, added Commerzbank.