Asian hours the main focus was on Australia. Against market expectations the RBA left monetary policy unchanged. However, it was stressed that further easing may be appropriate over the period ahead in order to foster sustainable growth in demand and inflation consistent with the target.
Considering that both unstable external demand conditions and muted domestic conditions keep inflation subject to downside risk, monetary policy expectations are likely to remain strongly capped around the current levels.
From that angle we expect the AUD to remain a sell on rallies, against both the NZD and the USD.
This is especially true as the RBA reiterated that the currency remains above most estimates of its fundamental value given the significant declines in key commodity prices.
Even if such remarks do not provide new information, they still confirm that view that the currency is regarded to be an important driver of monetary conditions. Up ahead, the main focus turns to this evening’s February services PMI and tomorrow’s Q4 GDP release.
This content has been provided under specific arrangement with eFXnews.