RBA Raise the Cash Rate, Reduces the Expectations

The Reserve Bank of Australia (RBA) decided to raise the cash rate by 25 basis points to 3.50 percent. Australia was the first major economy that decided to reverse some of its accommodative actions and today’s decision is for the second consecutive month that the central bank raises the borrowing cost. Although the market believes that more increases are still on the horizon but the statement from the bank reduced the expectations, saying that the higher rates would come “gradually”.

The charts below show the market reactions in the two rate decision meetings, today and the October 8.

Reserve Bank of Australia (RBA) Rate Decision on November 3 - 0.25 increase.

Reserve Bank of Australia (RBA) Rate Decision on October 8 - 0.25 increase.

Technical data always matters

Euro extended its decline after ECB signal downside risks to growth has been "materialized". Australian dollar also dropped below 0.9000 betting on the possibility of rate cuts from Reserve Bank of Australia. Today comments from the country's major banks which reflect willingness to "pass on potential central bank interest rate cuts to borrowers" showed that how near a rate cut is. In the case of Aussie I didn't aware of today's event but last night and in the lack of supportive technical data I refused to buy AUDUSD even at an apparently attractive price. (see also Aussie behavior in the new environment)