The Australian dollar is sharply lower on Tuesday. In the European session, AUD/USD is trading at 0.6507, down 0.80%. The Aussie is on a nasty slide and has declined by 1.7% since March 13.

RBA removes tightening bias

The Reserve Bank of Australia maintained the cash rate at 4.35% for a fourth straight time at today’s meeting. A pause was widely expected, which left the focus on the rate statement and Governor Bullock’s follow-up press conference.

The RBA statement noted that the “Board is not ruling anything in or out”, which was a change from the February statement which said “a further increase in interest rates cannot be ruled out”. The markets jumped on this slight variance, taking it as a signal that the RBA had removed its hiking bias. The Australian dollar has responded with sharp losses in the aftermath of the meeting.

The statement said that “encouraging signs that inflation is moderating”, but the RBA remains concerned that inflation still remains high and is worried about the uncertain economic outlook, both domestically and abroad. Household consumption remains weak and growth has slowed, and China’s economy remains a major concern.

The bottom line? Inflation is still too high and the RBA won’t be rushed into lowering rates until it sees a further drop in inflation. At her press conference, Governor Bullock tried to downplay the change in language in the statement, but the markets viewed this as a significant step towards trimming rates later this year.

In the US, it’s an unusually quiet week, with no tier-1 events on the data calendar. Investors will be focused on the Federal Reserve’s rate announcement on Wednesday. The Fed is virtually certain to maintain the benchmark rate of 5%-5.25%, and will be combing the rate statement for any insights about a date for an initial rate cut.

AUD/USD Technical

• AUD/USD has pushed below support at 0.6528 and is putting pressure on support at 0.6497
• There is resistance at 0.6584 and 0.6615

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