Australian Dollar Weakens Following RBA's Interest Rate Outlook

The Australian Dollar has fallen against most of its currency counterparts after the Reserve Bank of Australia (RBA) signalled a potential shift toward its first interest rate cut. Although the RBA left interest rates unchanged at 4.35%, it acknowledged that the economic outlook appeared "slightly softer" than anticipated at its August meeting.

This dovish stance is reflected in exchange rates, with the Pound to Australian Dollar rising to 1.9540, and the Euro to Australian Dollar reaching 1.6284. Meanwhile, the Australian Dollar has declined against the U.S. Dollar, trading at 0.6828.

For the first time since March, the RBA did not discuss a potential rate hike at its latest meeting. However, it reiterated that no rate cuts are expected "in the near term." The Bank expressed concerns that consumption growth could remain sluggish for an extended period, reducing inflationary pressures despite forecasts for economic growth to return to normal levels. Nonetheless, the RBA remains cautious about inflation, noting that disinflation has stalled, and stressed the need to stay alert to any potential inflationary risks.

While the RBA’s decision suggests there is no immediate rush to exit tight monetary policy, the initial steps toward easing have been made, contributing to a softer Australian Dollar. Currency watchers should also monitor developments in China, where newly announced stimulus packages may strengthen Australia’s primary trading partner, providing longer-term support for the Aussie.

AUD/USD Breaking Key Resistance

The AUD/USD has seen a shift toward positive short-term momentum after closing above the key resistance level of 0.6825, with crucial moving average indicators now trending upward. Longer-term resistance is expected just above the 0.7000 mark.

The AUD/USD has reached a 14-month high, while the AUD/EUR is now trading at a two-month high.