The Australian Dollar declined over 1.6 percent versus the US Dollar
after the Reserve Bank cut rates by 25 basis points. Economists were
expecting the bank to keep rates unchanged at 2.50 percent. Today’s
change in monetary policy marked the first time the bank adjusted rates
since August 7 2013, or 15 consecutive meetings.
Despite improving economic data out of Australia relative to forecasts,
the Bank’s decision to cut rates was seen as appropriate to achieve
balanced growth. There was overall negative sentiment on domestic demand
growth, output growth, and unemployment rates from RBA. The board also
mentioned that the Australian Dollar was seen above most estimates of
fundamental value. After the dovish statements made by the bank,
market’s are pricing in an almost guaranteed 99% chance of a 25bps rate
cut during the next rate decision.
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