Aussie is paring gains on Monday as RBA eases policy stance

The run higher yesterday after China news saw AUD/USD briefly move up above the 200-hourly moving average (blue line). But in the end, sellers held the line in pushing the pair down as the euphoria waned amid more negative sentiment in equities. That continued into today before the RBA pushed the issue with the pair now down another 0.7% to just under 0.6400.

It's pretty much back to square one again for AUD/USD as it runs back towards the levels seen last Friday. That puts the focus back on the April support area around 0.6362-89 and the August low of 0.6347 again.

So, what has actually changed from the RBA this time?

There was only one notable change in their policy direction passage. This is from November:

“While headline inflation has slowed significantly and will remain lower for some time, core inflation is more indicative of the trend of inflation, and remains too high. and approaching the middle. This reinforces the need to be vigilant about the upside risks of inflation and the Board does not regulate anything internally or externally. Policy must be sufficiently restrictive so that the Board is confident that inflation is moving steadily towards the target range.”

And then this is from today:

“While core inflation has slowed significantly and will remain lower for some time, headline inflation is more indicative of the trend of inflation, and remains too high. and approaching the middle. Recent data on inflation and economic conditions remain consistent with these forecasts, and the Board finds some confidence that inflation is moving steadily towards target.”

Basically, they have moved from the position of reaffirming that policy must remain more restrictive and that they are not “regulating anything in or out” to now being more confident that inflation heading in the right direction.

It's really a call now to cut rates at the next step but this is setting the stage to start talking about possibly cutting rates soon. There is no doubt that the weakening economic situation is also on their mind.