AUD Depreciates Against USD Following the Release of the RBA Dovish Meeting Minutes

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The Reserve Bank of Australia (RBA) made a significant decision in early March by raising interest rates by 25 basis points, resulting in a 3.6 per cent rate – the highest increase over a decade.

This notable increase marked the fifth consecutive hike of this magnitude and the tenth overall in a cycle that commenced in 2022. 

In their recent statements, policymakers have hinted at the possibility of “further tightening of monetary policy” shortly. However, this specific choice of wording marks a shift towards a more dovish stance in forward guidance, particularly when compared to the previous reference of “further increases.” 

The most recent policy meeting minutes were issued on March 21, confirming the dovish trend because they allow for a potential end to the cycle of rate hikes.

The minutes also state that officials decided to “reconsider the case for a pause” before the impending decision on April 4 to give themselves “additional time to reassess the outlook for the economy.”

Meanwhile, the US Federal Reserve made its monetary policy decision public on March 22.

“Monetary policy in the United States comprises the Federal Reserve’s actions and communications to promote maximum employment, stable prices, and moderate long-term interest rates–the economic goals the Congress has instructed the Federal Reserve to pursue,” the Federal Board stated.

With the dovish RBA minutes, the AUD/USD pair also declined as markets remain tense on the impending financial crisis and the Fed meeting that will define the movement’s next step. This puts it at risk of falling to 0.6628, while more deterioration would be required to reach fresh 2023 lows (0.6563).

The most recent policy meeting occurred before the Silicon Valley Bank shut down. Authorities worldwide have been rushing to protect the financial system, and these developments support the argument for central banks to take a more cautious stance.

The RBA’s dovish stance and the Fed decision have resulted in a bearish sentiment towards the AUD/USD currency pair. 

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