In anticipation of the decision of the Reserve Bank of Australia (RBA) on monetary policy, the AUD / USD pair slipped to 4-month lows. The sale of the Aussie was primarily caused by the threat of an escalation of the trade conflict between Washington and Beijing. In addition, analysts had expected the Australian Central Bank to lower the interest rate this month.
However, following the results of the next meeting, the RBA decided to keep the rate unchanged (1.50%). This caught many market participants off guard and provoked a rapid rally "Aussie".
The head of the RBA, Philip Low, was rather restrained in the comments. He noted the availability of free capacity in the economy and the need to further improve the situation on the labor market so that inflation could reach the target level, but did not give any hints of monetary policy easing over the coming quarters.
Apparently, the regulator chose to refrain from any action on the eve of the elections to the federal parliament of Australia, which will be held on May 18. The current government and the opposition have promised voters a tax cut and increased investment in the country's infrastructure.
In addition, increasing trade tensions between the United States and the Celestial Empire gives the RBA many causes for concern. Given the inclination of the head of the White House, Donald Trump, to take spontaneous decisions, it seems reasonable for the RBA to wait for the official settlement of this conflict before lowering the interest rate. If Washington is able to push Beijing to sign a trade agreement soon with its threats, then the rate cut will probably not be needed at all.
The material has been provided by InstaForex Company - www.instaforex.com