AUD/USD Exchange Rate Advances on Upbeat RBA Outlook
The Australian Dollar to US Dollar (AUD/USD) exchange rate remains on the front foot this afternoon after the Reserve Bank of Australia (RBA) appeared to dismiss speculation of a rate cut in 2019.
At the time of writing AUD/USD exchange rate is currently up by 0.3% this afternoon, having given up some gains since rocketing up overnight.
Australian Dollar (AUD) Exchange Rate Surges as RBA Dispels Rate Cut Concerns
The Australian Dollar (AUD) soared at the start of today’s session after the Reserve Bank of Australia struck a more upbeat outlook than expected following its first policy meeting of 2019.
The bank voted to keep rates on hold this month, whilst also flagging downside risks to GDP due to signs of deteriorating global growth.
Despite this the RBA still appeared confident in its outlook for 2019, with the bank being particular upbeat in regards to inflation which is sees as ‘gradually’ returning to its target range in the coming months.
This helped to dispel recent fears that the new rate move from the RBA could be lower, driving the upswing in the ‘Aussie’.
Felicity Emmett, Co-head of Australian Economics at ANZ bank said:
‘Despite the downgrade and increased risks, the bank is still broadly positive about the outlook, with GDP growth expected to be an above-trend 3% this year.
‘Our reading of the statement is that the Bank remains of the view that the next move in interest rates is most likely up, but not for some time. We expect the RBA Governor to say words to this effect when he speaks on Wednesday.’
US Dollar (USD) Clipped by Slide in Service Sector Growth
Meanwhile the US Dollar came under modest pressure on Tuesday afternoon following the publication of the latest US services index.
According to the ISM non-manufacturing PMI, growth in the US service sector continued to moderate in January, following a sizable drop in new order growth.
Respondents to the index appeared most concerned about the partial US government shutdown but despite this the outlook remained broadly upbeat, with employment still accelerating at the start of the year despite economic headwinds.
AUD/USD Exchange Rate Forecast: US Trade Figures to Strengthen USD?
Looking ahead, the Australian Dollar US Dollar (AUD/USD) exchange rate may lose some ground tomorrow afternoon in the wake of the latest US trade figures.
Economists forecast that the trade deficit will have narrowed in November, potentially prompting some modest gains in the US Dollar.
In the meantime the focus for AUD investors is likely to remain on the RBA as Governor Philip Lowe delivers his first speech of the year later tonight.
This may result in the Australian Dollar finding further support should Lowe’s comments reinforce the RBA’s upbeat outlook for 2019.