With the start of trading on Tuesday, Asian stock markets fell as investors remained cautious ahead of the Reserve Bank of Australia’s interest rate decision, as well as inflation readings and business activity in Asian markets. Australian, Japanese, Hong Kong, and mainland Chinese stocks all fell.
The Reserve Bank of Australia’s interest rate decision was released this morning, with the bank maintaining interest rates at 4.10 percent for the third month in a row, in line with expectations, and the interest rate paid on exchange settlement balances remaining unchanged at 4.00 percent. Interest rates have been raised by four percentage points since May of last year, and the council stated that inflation has passed its peak, though it remains high,whiletheeconomyisexperiencingsubpargrowthandunemploymentisexpectedtorisegradually.
Thecentralbankemphasizedthatadditionalmonetarytighteningmayberequiredtoreturninflationtothetargetrangeof2to3%withinareasonabletimeframe andthatanyinterestrateadjustmentwillbedependentonhowtheeconomyandpricesdevelop.Meanwhile,risingexpectationsthatChinawillimplementadditionalpoliciestosupportitsstrugglingeconomy,aswellasbetsthattheFedwillstopraisinginterestratesthisyear,
havebroadenedthescopefortheAustraliandollar. Priortotheinterestratedecision,Australia’scurrentaccountshowedacontractioninthecurrentsurplustoA$7.7billioninthesecondquarterof2023,whichwaslowerthanmarketexpectationsofA$8 billion , The current account surplus was the smallest since the third quarter of 2022, when the account was in deficit.Against this backdrop, the Australian dollar fell by 1.33% to its lowest level in a week, receiving additional selling pressure around the 20- and 50-day moving averages, which are compatible with resistance levels around 0.645. Meanwhile, momentum indicators revealed an increase in selling pressures, with the pair settling below the moving averages for 20 and 50 days, indicating that the pair is likely to target the support levels around 0.6287, and if those levels are broken and more selling pressures are received, the next support levels around 0.6206.
