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As widely expected, the Reserve Bank of Australia made no changes to it’s monetary policy today, Tuesday 7th July 2015, and kept interest rates steady at 2%.
The Statement by Governor Glen Stevens said that leaving the interest rate unchanged was appropriate:
“The Board today judged that leaving the cash rate unchanged was appropriate at this meeting. Information on economic and financial conditions to be received over the period ahead will inform the Board’s assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target” – RBA Statement.
USG Chief Executive Officer, Shay Zakhaim, said that given the decline in commodity prices and the state of the housing market, especially in Sydney, it was an appropriate response by the RBA to leave the cash rate unchanged.
“There has been a substantial decline in Australia’s terms of trade due to falling commodity prices. Both mining and non-mining investment are under underperforming and China’s performance is a factor too. The heated housing market, especially in Sydney, is also something that we need to keep an eye on. So all in, USG concurs with the RBAs decision to leave the cash rate on hold” said Mr Zakhaim.
If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is considered bullish for the Australian dollar. Similarly, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate, it is considered bearish.
Regardless of whether the RBA increases, decreases, or maintains the interest rate, the decision of the RBA always has an effect on the Australian Dollar. Increasing the interest rate appreciates the currency and decreasing the interest rate generally has a depreciating effect on the currency.
There are 2 key ways in which forex traders can trade the Australian dollar with the RBA rate decision:
Before the RBA delivers it’s decision:
~ If the RBA decision matches the market’s expectations then forex traders generally do not enter a trade either way.
~ If the RBA cuts interest rates when the market was expecting it to increase or to stay on hold, traders usually sell the Australia dollar.
~ If the RBA increases interest rates when the market was expecting them cut or to stay on hold, traders usually buy the Australian dollar.
The other way is trading after the RBA has delivered it’s decision:
~ -If the RBA decision matches expectations; traders generally do not enter into a trade.
~ If the RBA cuts interest rates when the market was expecting it to increase or to stay on hold, traders usually sell the Australia dollar.
~ If the RBA increases interest rates when the market was expecting them cut or to stay on hold, trades usually buy the Australian dollar.
To trade the Australian dollar with an Australian forex broker visit www.usgfx.com and gain immediate access to foreign exchange trading.
About USG
USG is a regulated Australian broker and holds an Australian Financial Services License. With the company head quartered in Sydney, clients of USG are able to access the markets to trade major and exotic FX Currency Pairs, CFDs, indices and commodities.
Release ID: 86208