AUD: Less dovish RBA minutes offer some relief – MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the Australian dollar has been the strongest performing currency in the Asian trading session supported by the release of the less dovish than expected minutes from the RBA’s last policy meeting.

Key Quotes

“The AUD/USD rate has bounced off technical support in the near-term from its’ 200-day moving average at 0.7260. The minutes from their meeting in May revealed that it appears like it was a close decision for the RBA to lower their key policy rate by 0.25 percentage point to 1.75%. The minutes stated that “members discussed the merits of adjusting policy at this meeting or awaiting further information before acting” before “members were persuaded that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing at this meeting”.

As the decision appeared less than clear cut it has also dampened expectations for the RBA to deliver further easing as early as at their upcoming meetings in June or July which come before the release of the next Australian CPI report for Q2. The RBA will likely need to see further confirmation that the very low inflation print in Q1 is persistent before pulling the trigger on further easing this year. The dampening of RBA easing expectations will help to ease some of the downward pressure on the Aussie in the near-term.”