The Australian dollar was losing ground on Wednesday after the country’s central bank ruled out the possibility of a short-term interest rate hike, although it also did not hint at the possibility of one. decline for the coming months.
The Reserve Bank of Australia’s (RBA) belief that rates are at the right level at the moment has pushed bond yields lower and led futures to reduce the likelihood of a rate rise to 13% from 40%. % before the decision.
“All of this implies the hurdle to a further rise may be higher than markets expected,” said Adam Boyton, head of Australian economics at ANZ.
“We continue to favor November for the start of the easing cycle, although risks remain skewed towards this being delayed until 2025 and being shallower than we forecast, and we only expect three rate reductions in total.
Indeed, markets believe that there is little chance of a reduction before April next year and that only a quarter-point easing is expected by October.
This outlook is significantly more optimistic than that of most other major central banks. The Federal Reserve is expected to begin cutting rates in September, and futures forecast 43 basis points of easing by the end of the year.
Markets are pricing in 71 basis points of easing for the European Central Bank this year, and 52 basis points for the Bank of England.
This divergence offered the Aussie support around $0.6575, following Tuesday’s pullback from resistance at $0.6650, but the immediate trend is down.
There is more support around $0.6550, while $0.6650 has become a major technical barrier.
The Kiwi dollar was a spectator of most of these events, holding at $0.5990 and well above last week’s low of $0.5875.
Australian 3-year bond futures rose another tick to 96.010, on top of an 11-tick rally on Tuesday.
Yields on 10-year bonds are down 17 basis points for the week so far at 4.25%, widening their discount to Treasuries to 20 basis points.
No major economic data is expected from Australia or New Zealand for the remainder of the week, with the next major releases being Australian wages figures on May 15.
Overseas, Chinese trade figures on Thursday could provide some guidance, as could the Bank of England’s policy meeting on the same day. (Reporting by Wayne Cole; Editing by Edwina Gibbs)
