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Today Reserve bank of Australia (RBA) delivered 25 basis points rate cut bringing RBA's benchmark lending rate to 2%. Aussie lost ground initially however bulls showed remarkable resilience and pushed the pair to new intraday high.
Key highlights from RBA policy -
- RBA recognizes improvement in household demand and overall employment. However remain concern over business capital expenditure in both mining and non-mining sector. RBA expects lower capital expenditure along with subdued public spending would keep economic activity somewhat subdued for the next one or two years.
- While low interest rates would continue to be supportive of borrowing and spending according to RBA, it might also be contributing to higher property prices. Real estate prices are rising sharply in Sydney, for which RBA is working with regulators to contain the risk.
- RBA doesn't see any threat of high inflation arising from lower exchange rate, on the contrary according to RBA, Aussie might fall further against pairs other than dollar.
Aussie traded dropped to 0.7784 from 0.7852 after the announcement, however recover soon and traded around 0.792, three day high within moments.
As of now, it seems that bulls seems pretty strong, however it is too early to say that bears have given up completely as they defended 0.80 key resistance area well. Wait and watch is advised with less positions as price might consolidate here. This week's NFP report might lead to a breakout.
