RBA statement ends AUD/USD surge

Source: Dukascopy Bank SA
On September 7, the Reserve Bank of Australia announced its Cash Rate and published a Rate Statement. In general, the central bank revealed that the economy of Australia would recover, which signals that demand for the Australian Dollar and its value would grow. However, the Delta variant of the coronavirus has delayed the recovery. Due to that reason the RBA would keep its stimulating monetary policy intact.

Quoting the statement: "Prior to the Delta outbreak the Australian economy had considerable momentum. GDP increased by 0.7 per cent in the June quarter and by nearly 10 per cent over the year. Business investment was picking up and the labour market had strengthened. The unemployment rate had fallen below 5 per cent and job vacancies were at a high level.

The recovery in the Australian economy has, however, been interrupted by the Delta outbreak and the associated restrictions on activity. GDP is expected to decline materially in the September quarter and the unemployment rate will move higher over coming months. While the outbreak is affecting most parts of the economy, the impact is uneven, with some areas facing very difficult conditions while others are continuing to grow strongly.

The Board is committed to maintaining highly supportive monetary conditions to achieve a return to full employment in Australia and inflation consistent with the target. It will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. The central scenario for the economy is that this condition will not be met before 2024."

Monetary Policy Statement

Statement by Philip Lowe, Governor: Monetary Policy Decision

Immediately on the announcement the AUD/USD jumped by 28 base points. The move up could have been caused by the initial statement that the economy had recovered. However, afterwards the pair decline from the new high by 55 base points, as it became clear that the economy is not expected to continue to recover. Moreover, the currency market will continue to be flooded with Australian Dollars.

On a larger scale, the event broke a channel up pattern, which had guided the AUD/USD currency exchange rate since August 19.

Initial Reaction

Larger scale situation

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