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Australian Dollar Appreciates As RBA Holds Rate, Lifts Growth Forecasts

The Australian dollar spiked higher against its most major trading partners in the Asian session on Tuesday, after Australia’s central bank retained its benchmark interest rate at a historic low and lifted economic growth forecast led by the strong recovery in economic activity.

The policy board of the Reserve Bank of Australia headed by Governor Philip Lowe decided to leave its cash rate unchanged at a record low of 0.10 percent.

The central bank retained the target yield on the 3-year Australian government bond at around 0.1 percent and also maintained the parameters of the Term Funding Facility and the government bond purchase programme.

The bank repeated that it will not increase the cash rate until actual inflation is sustainably within the 2 to 3 percent target range.

For this to occur, the labor market will need to be tight enough to generate wages growth that is materially higher than it is currently, the bank said. This is unlikely to be until 2024 at the earliest.

The RBA raised economic growth projections, with growth of 4.75 percent seen over 2021 and 3.50 percent over 2022.

Data from the Australian Bureau of Statistics showed that Australia posted a seasonally adjusted merchandise trade surplus of A$5.574 billion in March.

That was shy of expectations for a surplus of A$8 billion following the upwardly revised A$7.595 billion surplus in February.

Separate data showed that Australia’s home loans rose a seasonally adjusted 3.3 percent on month in March, coming in at A$22.4 billion.

That follows the 1.8 percent decline in February.

Asian stock markets are trading mixed following the mixed cues overnight from Wall Street as traders remain worried about the pace of global economic recovery amid a renewed spike in coronavirus cases in the region, with restrictions and lockdowns in several areas.

The aussie rose on Monday amid continued optimism about the economic outlook in the wake of positive data.

The aussie added 0.3 percent to hit an 8-day high of 1.0799 against the kiwi. The AUD/NZD pair had finished Monday’s deals at 1.0768. Further rally may take the aussie to a resistance around the 1.09 area.

The aussie gained 0.3 percent to 84.74 against the yen, after dropping to 84.49 at 10:45 pm ET. The pair was valued at 84.60 when it ended trading on Monday. Immediate resistance for the aussie is seen around the 88.00 level.

The aussie firmed to a weekly high of 1.5528 against the euro, up 0.04 percent from Monday’s close of 1.5534. Further rise in the currency may challenge resistance around the 1.49 level.

On the flip side, the aussie edged down to 0.9510 against the loonie, following a high of 0.9531 hit at 5:30 pm ET. At Monday’s close, the pair was worth 0.9522. On the downside, 0.93 is possibly seen as its next support level.

The aussie fell to 0.7735 against the greenback as the latter rose on Fed Chairman Jerome Powell’s optimistic comments on the economy. The aussie had finished yesterday’s trading session at 0.7758 against the greenback. The aussie is seen finding support around the 0.75 level.

In today’s events, U.K. manufacturing PMI for April and mortgage approvals data for March will be released in the European session.

U.S. and Canadian trade data, Canada building permits and U.S. factory orders, all for March, are set for release in the New York session.

The material has been provided by InstaForex Company – www.instaforex.com