AUDUSD rebounds below 0.6660 despite PBOC maintaining stable interest rate policy

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  • AUDUSD resurfaced after slipping below 0.6660 despite the unchanged monetary policy of the PBOC.
  • Led by rising Covid-19 cases and weaker real estate demand, the PBOC was expected to appear dovish.
  • Going forward, RBA’s Lowe speech will be of utmost importance.

AUDUSD retreated after falling below immediate support at 0.6660 despite the People’s Bank of China (PBOC) keeping its interest rate stance “unchanged”. session.

Led by rising Covid-19 infections and vulnerable real estate demand in China, the PBOC was expected to look “dovish” on its prime lending rates (PLR). Domestic catalysts have extremely weakened the economic projections, which is why a rate cut was considered. The absence of expansionary measures in monetary policy has volatility of the Australian dollar, being one of China’s main trading partners.

Last week, the release of upbeat Australian employment data delighted the Reserve Bank of Australia (RBA). According to the Australian Bureau of Statistics, the economy managed to make new payroll market additions of 32.2k compared to the consensus of 15k and the previous release of 0.9k. In addition, the unemployment rate was reduced to 3.4% from expectations of 3.6% and the previous figure of 3.5%. This could help the RBA to increase its official exchange rate (OCR) without hesitation.

Meanwhile, US dollar index (DXY) settled above the 107.00 round level hurdle and accelerated to near Tuesday’s high of 107.24. A rebound in negative market sentiment impacts currencies perceived as risk. Yields on 10-year US Treasuries fell further below 3.81% as the odds of a continuation of the period of 75 basis point (bp) rate hikes by the Federal Reserve (Fed) narrowed. drastically reduced.

Going forward, investors will focus on the RBA talk Governor Philip Lowe, which will be delivered on Tuesday. The RBA Governor could dictate the likely monetary policy actions ahead.

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