Release Explanation: Changes in rates affect interest rates in consumer loans, mortgages, and bond rates. Since short term interest rates essentially reflect the return on holding a currency, rate decisions usually affect the exchange rate of the Australian Dollar. Increases in rates, or even expectations for increases, tend to cause the Australian Dollar to appreciate, while rate decreases cause the currency to depreciate. This is a detailed record of the recent interest rate meeting. This release is very important for traders to discern the RBA’s stance on monetary policy and hints of future rate shifts.
Trade Desk Thoughts: The following reasons were given for the RBA’s decision to lower interest rates by 100 basis points.
- The recent stimulus package is expected to encourage stronger demand in late 2009.
- Interest rate reductions amount to very significant policy easing
- The fiscal and monetary stimuli will take time in order to be effective
- The RBA expects demand in the near term to be weaker as well as a slowdown in output
- There has been a noticeable improvement in credit and money markets seen since November
Forex Technical Reaction: After advancing to the LFB R1 level the aussie was rejected shortly after this release and has fallen below the neutral pivot point.
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