The AUDUSD currency pair was trading down over 64 pips as the US dollar rallied against the Aussie dollar following the Reserve Bank of Australia’s (RBA’s) interest rate decision. The RBA left its base lending rate unchanged at 4.35%, triggering an extension of the Aussies’ drop against the US dollar.
AUDUSD Fell After RBA Kept Interest Rates Stable at 4.35%
The RBA also noted that it would require more economic signals before considering any further adjustments to monetary policy. In their policy statement, the RBA pointed out that the October monthly CPI indicator indicated a continued inflation moderation.
The AUD/USD pair is experiencing a decline, marking its second consecutive day of losses after retracing from the 0.6700 level, which represented a four-month high.
Additionally, conditions in the labour market, while still relatively tight, were gradually easing. This suggests that the possibility of additional rate hikes in the near term has diminished, placing downward pressure on the risk-sensitive Australian Dollar.
Global concerns are also weighing on investor sentiment, primarily due to deteriorating economic conditions in China and the overall darkening global outlook. Furthermore, an attack on US vessels in the Red Sea over the weekend has raised fears of a broader conflict in the Middle East, further dampening risk appetite.
Despite the release of better-than-expected data showing that business activity in China, as reflected by the Caixin China Services PMI, grew faster in November, the Australian Dollar failed to gain traction.
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Investors are currently favouring the US Dollar due to its perceived safe-haven status amid the ongoing global uncertainties. However, expectations of a dovish stance from the Federal Reserve (Fed) might limit further USD gains.
Market participants believe that the Fed has concluded its tightening cycle and are pricing in a possibility of the first-rate cut as early as March 2024. This dovish outlook and the global flight to safety have driven US Treasury bond yields lower.
Given the mixed fundamental backdrop and cautious market sentiment, traders in the AUD/USD pair should exercise prudence in their decision-making processes.
