The Australian dollar is sharply higher today after the Reserve Bank of Australia kept interest rates on hold, going against around half of analysts’ predictions.
At 7.09pm (GMT) the Aussie dollar was trading at US71.96c up from US71.44c in yesterdays close.
After shooting up as high as US72.18c after the announcement, the Australian dollar pulled back after a monetary statement from the RBA where they mentioned that although rates were kept on hold, further monetary easing may be possible in the nearest future.
“At today’s meeting the board judged that the prospects for an improvement in economic conditions had firmed a little over recent months,” noted Gov. Glenn Stevens. “The outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand,” Mr. Stevens added.
Investors will now be left hanging in the balance with a rate cut now fully priced in for February, but many factors may bring the move further such as a repeat performance of last week’s disappointing CPI numbers which are well below the RBA’s target rate.
Trade balance figures from Australia will be closely watched tomorrow with any weakness likely to put further pressure on the Aussie dollar and give the RBA something to think about at December’s meeting.