JPY Daily News

RBA Cuts Rates and AUD Plunges

In the face of changes to the global macro environment the Reserve Bank of Australia decided to lower its interest rate 25 bp to 4.50%. RBA Governor Glenn Stevens said the central bank now maintains a “neutral stance.” It is interesting to note that outside influences are driving the monetary policy of Australia rather than domestic factors, though Australia has always been particularly dependent on Chinese economic growth to drive its own economy. Yesterday's drop in China's Purchasing Manager's Index to 50.4 in October, dangerously close to the 50 boom/bust level does not bode well for the Australian economy nor the global economy for that matter.

At this time the AUD still represents one of the only developed market currencies with a relatively high interest rate. A reversal of market sentiment could be a catalyst for the AUD. The key level for the AUD/USD is 1.0230 where the 20-day moving average coincides with the 38% retracement of the October move. Below here rests support from 1.0120 from the October 18th low.

Current Time: 05/26 22:50 GMT

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