RBA Cuts Cash Rate by .25 BPS

by on August 6, 2013 5:11 am BST

The Reserve Bank of Australia (RBA) cuts the cash rate by .25 bps that fell in line with analyst expectations.

RBA Governor Glenn Stevens released a media statement following the cash rate decision. The decision to cut the cash rate was largely due to the slowdown in Australia’s economy with commodities declining heavily in 2013.

The statement acknowledges the lax financial conditions seen globally, but volatility in financial markets have affected many emerging markets.

Australia’s economy should begin to stabilize as it adjusts to lower levels of mining investments, but the unemployment continue to cause concern as it edges higher. Inflation data has been consistent with mid-term targets.

Interesting enough, even with a 15 cent decline in the AUDUSD, the statement said that the currency remains at a high level. “It is possible that the exchange rate will depreciate further over time, which would help foster a rebalancing of growth in the economy.”

The AUDUSD popped higher on the news, currently trading up .53 percent at .8974. Key resistance at .90 should continue to be tested. Potential bullish break of .90 should see more resistance at .9050, but it is important to note that the RBA is routing for a further decline in the currency to spur growth. Continue downside target of .8760 is still in reach.