RBA Keep Interest Rates at 2.25% (Matthew Vassallo)

Australian Dollar Forecast: AUD Holds Firm Against US Dollar

The Reserve Bank of Australia (RBA) surprised the markets earlier this week by keeping their base interest on hold at 2.25%. It was widely anticipated that the central bank would cut base rates to 2% but this move did not occur. Reports today have indicated the reason for this is concerns over house price growth, particularly in Sydney and that the last thing the RBA want is to cite monetary stimulus, which ultimately drives up house prices.

This week has also seen the release of the latest Australian Gross Domestic Product (GDP) figures, with economic growth slowing to 2.5%. Although this figure was expected, it has reinforced a negative feeling that currently surrounds the resource-rich economy.  With growth rates at this level, unemployment levels are unlikely to improve and with the RBA seemingly content to see the AUD lose further market value, the current woes for the AUD may not be over.

With further data out for Australia overnight in form of their latest Retail Sales figures, we could see further volatility on GBP/AUD rates before the weekend. The AUD did in fact strengthen by over a cent against the Pound during Wednesday’s trading, with the markets citing the RBA’s decision not to cut their base rate as a positive, rather than looking at the negative spin.

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