Australian dollar slips as Reserve Bank of Australia keeps interest rates steady

On Tuesday, the Australian Dollar declined after the Reserve Bank of Australia (RBA) decided to maintain interest rates instead of pursuing an 11th consecutive hike this year. Policymakers stated that they wanted to assess the results of the current interest rates and analyze economic forecasts. Senior market analyst at City Index, Matt Simpson, noted that the RBA viewed inflation as being at its maximum, which led to the delay in further rate hikes. 

Furthermore, analysts predict the RBA will keep its cash rate steady at 3.6% for the next few months except for a remote possibility of a sudden rise in inflation data. The US dollar rebounded following the release of the US Institute for Supply Management (ISM) report which revealed a decline in U.S manufacturing activity.

As a result, traders reduced their expectations of how long interest rates should continue to combat inflation, and the dollar fell relative to the US Treasury yields. The British pound and the New Zealand dollar rose to multi-week highs before retreating. Finally, analysts from Wells Fargo dismissed the ISM manufacturing data, referring to it as a “dud,” adding that it could spark a looming economic depression. Meanwhile, the 2-year Treasury yield dropped almost 10 basis points on Monday, while futures indicated that the Federal Reserve could start cutting rates from September up to the end of the year.