The Reserve Bank of Australia (RBA) left its benchmark rate unchanged at 0.1% as expected and the bank reiterated that the benchmark rate would not be raised until actual inflation was sustainably within the range target of 2% to 3%. Thereafter, ING economists expect the AUD/USD pair to be capped at the 0.7300 level.

RBA freezes political discussion until May

“The RBA has defied expectations that it is moving towards a more hawkish stance. The focus remained on wage growth which “remains modest”, adding that “it is likely to take some time before labor cost growth reaches a rate consistent with sustained inflation objective”. This all but freezes policy discussion until mid-May, which could limit the AUD’s gains against peers who can rely on ongoing central bank tightening cycles.

“Tomorrow’s fourth quarter Australian growth figures are expected to show a 3.5% quarter-on-quarter rebound, but should have limited impact on the AUD given the focus of the RBA on wage dynamics.”

“AUD/USD could climb to 0.7300 today on the back of a relatively bullish risk environment, but even though it is less exposed to the Ukrainian conflict than European currencies, its high beta against sentiment continues to pose short-term downside risks.” term.”