- The Australian dollar rises nearly 1% as central banks around the world normalize monetary policy.
- An upbeat market sentiment is driving commodity currencies such as the AUD and the NZD.
- The Minutes from the last RBA meeting confirmed that they would not raise rates to cool down the housing market.
The AUD/USD it is skyrocketing during the American session, gaining 0.99%, trading at 0.7484 at the time of writing. A positive mood in the markets surrounds financial markets as gains in US stocks ease concerns about high prices. The largest US stock indices are up 0.50% to 0.82%, while the dollar weakens across the board.
Reserve Bank of Australia would not raise rates to cool housing market
On Tuesday, the Reserve Bank of Australia released the Minutes of the latest meeting. They said higher interest rates would help drive prices up in the housing market, though it would come at the cost of fewer jobs and lower wage growth. In addition, the Minutes revealed that such a move would move the bank away from achieving monetary policy objectives, that is, full employment and inflation around the 2-3% target.
Policymakers at the RBA have voiced their opinion on not raising rates to help them cool down the housing market, while trying to increase the pace of wage growth and bring inflation back to the 2-3% target in a sustainable way.
Despite the above, investors have increased the odds of an interest rate hike in 2022. The Bank of England and other developed economies see their central banks shifting towards normal monetary policy. The result of those bets is the price action of the day, with commodity currencies such as the Australian and New Zealand dollars hitting new highs against the dollar.
Meanwhile, the US economic docket included September’s housing starts and building permits. Homebuilding increased to 1,555M below the expected 1.62M. In contrast, Building Permits, which measures the construction sector, increased to 1,589M, lower than 1.68M, due to a shortage of qualified employees and high raw material costs.
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