Key Points:
No Change in Rates – The RBA keeps the Official Cash Rate (OCR) at 4.1%, in line with expectations.
Market Awaits Bullock’s Speech – Traders look for signals on future rate cuts.
AUD Struggles – Broader risk sentiment and trade tensions weigh on the currency.
RBA Holds Rates, No Surprises But Traders Await Guidance
The Reserve Bank of Australia (RBA) has kept its Official Cash Rate (OCR) unchanged at 4.1%, a move widely anticipated by markets. Despite high borrowing costs, the central bank remains cautious about easing too soon, waiting for inflation and growth data before making its next move.
The RBA’s decision aligns with its February rate cut, when it lowered rates by 25 basis points, marking the first cut since late 2020. With inflation cooling and economic growth slowing, traders now turn their focus to Governor Michele Bullock’s press conference for insights into the RBA’s policy outlook.
Why the RBA is Maintaining a Cautious Stance
The RBA’s decision to pause rate cuts aligns with a broader global trend among central banks, as policymakers navigate the challenge of balancing inflation control with economic stability. The central bank has consistently pointed out both upside and downside risks to its monetary policy decisions.
Australia’s headline inflation declined to 2.4%, marking a three-year low, while underlying inflation fell to 3.2% in the last quarter of 2024. These developments supported the RBA’s previous rate cut but also left room for a cautious approach moving forward.
Additionally, global uncertainties loom large. The impending “Liberation Day” tariffs set to be announced by U.S. President Donald Trump have raised concerns about their potential impact on Australia’s export-driven economy. The RBA is likely factoring in these external risks when making its policy decisions.
Governor Bullock’s Statement: Will It Signal Future Rate Cuts?
With the rate decision being largely priced in, investors and traders are now shifting their attention to Governor Michele Bullock’s post-meeting speech, which may offer valuable insights into the central bank’s outlook.
Some key factors to watch in Bullock’s comments include:
Inflation Trends: While inflation has slowed significantly, the RBA remains cautious. Bullock may discuss whether inflationary risks have fully abated or if further tightening remains on the table.
Economic Growth: Australia’s economy expanded by 1.3% in the final quarter of 2024, slightly above market expectations. If Bullock signals continued economic resilience, the likelihood of further rate cuts may decrease.
Labor Market Conditions: Unemployment remains stable, but sluggish wage growth could serve as a justification for additional rate reductions. If Bullock highlights concerns about labor market softening, expectations for a future rate cut could gain traction.
A hawkish tone, suggesting that inflation risks persist, could temporarily boost the Australian Dollar. Conversely, a dovish stance, emphasizing downside economic risks, might weigh on the currency.
How the RBA’s Decision Affects AUD/USD: Bearish Pressures Remain
Following the RBA’s decision to hold rates at 4.1%, the Australian Dollar (AUD/USD) remains under pressure, continuing its downward trajectory. Risk aversion, global economic uncertainty, and technical resistance levels have all contributed to the pair's inability to break higher.
Technical Analysis: AUD/USD Struggles Below Key Resistance
The chart shows a well-established downtrend, with AUD/USD struggling to break above the descending trendline (purple line).
Major resistance is seen at 0.6358, where sellers have consistently stepped in to push the pair lower.
A strong supply zone (highlighted in red) has repeatedly rejected bullish advances, reinforcing the bearish outlook.
On the downside:
Key support lies near 0.6167 – 0.6150 (green box), a level where buyers previously stepped in to prevent further losses.
If the price breaks below this zone, further selling pressure could drive AUD/USD towards 0.6100 or lower.
Market Sentiment for AUD/USD
The Relative Strength Index (RSI) remains below 50, indicating continued bearish momentum with no immediate reversal signals.
The RBA’s cautious stance and U.S. trade policy risks continue to weigh on the Aussie.
Without a strong bullish catalyst, AUD/USD could retest its yearly lows, especially if global markets maintain their risk-off stance.
For AUD/USD to recover, it would need a clear break above 0.6358, supported by strong economic data or a shift in risk sentiment. Until then, the bias remains bearish, with traders watching U.S. economic data and trade developments for the next potential market-moving catalyst.
What Comes Next? Will the RBA Cut Rates Again in May?
With Australia’s next quarterly inflation report due in late April, the RBA will likely remain on hold until it has more economic data. Investors and analysts will closely monitor key upcoming reports to gauge whether another rate cut is imminent.
Key Economic Indicators to Watch:
• CPI & Inflation Trends: If inflation continues to cool, expectations for further easing will increase.
• GDP Growth Data: Any slowdown in economic growth could push the RBA toward additional rate cuts.
• Global Market Risks: U.S. trade policies and China’s economic performance will continue to influence AUD sentiment.
For now, the RBA’s stance remains cautious yet flexible, leaving traders to navigate an uncertain economic landscape and shifting global market risks.