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US Dollar Higher as Fiscal Deal Reached and FOMC less Dovish

Christopher Almeida

Australian_Dollar_Higher_as_RBA_Hold_Rates_Less_Dovish_body_rba_decision_2_april.png, US Dollar Higher as Fiscal Deal Reached and FOMC less Dovish

THE TAKEAWAY: The Australian Dollar rallied close to 0.5 per cent against the U.S. Dollar as the RBA decided to hold rates as expected and released a somewhat more optimistic statement.

The RBA, in their April meeting decided it was prudent to leave the official cash rate unchanged at 3.0 per cent. In their statement, the Bank noted that downside risks in terms of global growth appeared to be reduced with the United States experiencing moderate expansion. Growth in China - Australia’s largest two way trading partner - was also seen to have stabilized at a reasonable pace with domestic growth close to trend over 2012.

After relatively soft retail data being printed in January and February of 2013, the RBA reported that moderate growth in private consumption spending is occurring with dwelling investments slowly picking up. In their March statement, the Reserve Bank stated that easing carried out through 2011 was still yet to take effect, however indicators as of April were suggesting that the easing steps are having an expansionary effect on the Australian economy.

The rate cut hold was largely expected by markets, however the less dovish statement saw investors regain confidence in the commodity based currency causing it to rally against most of its major counterparts.

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