Australian interest rates are held as retail sales grow.
The Reserve Bank of Australia (RBA) decided to maintain the country’s interest rate at 2.25%, a level that the bank dropped to in February this year from 2.5% which was a rate that was held since August 2013. This latest figure was equal to previous and expectations.
Inherently linked to currency rates, the RBA has determined the course of the AUD in an attempt to weaken it against the greenback since 2011 when highs of 1.10784 were seen. Currently the pair stands at 0.76842 with Tuesday’s rise of over 1% as a response to the rate news.
The RBA released a statement that explained the reason behind the decision; ‘Financial conditions are very accommodative globally, with long-term borrowing rates for several major sovereigns at all-time lows. Financing costs for creditworthy borrowers remain remarkably low.’ These beneficial costs are desperately needed for Australian companies especially for commodity producers on which Australia is so dependent.
However, the bank also hinted at a future change in the key rate saying, ‘A lower exchange rate is likely to be needed to achieve balanced growth in the economy.’ Adding, ‘Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The Board will continue to assess the case for such action at forthcoming meetings.’
In other data, the Australian Bureau of Statistics released a higher than expected Retail Sales figure for the month at 0.7% versus a forecast of 0.4% and last month’s figure of 0.5%. With consumer spending increasing and house prices rising, Australia’s economy is seen to be growing and the bulls started trading positively on the AUD on Tuesday.
MT4 chart: AUDUSD
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