The Australian Dollar (AUD) has weakened following the RBA's latest monetary policy meeting. MUFG Bank economists analyze the outlook for the AUD.
RBA to start cutting rates in second half of this year
The RBA kept its official interest rate unchanged for the third consecutive meeting at 4.35%. However, the RBA softened its guidance on the likelihood of further rate hikes in the updated policy statement.
The RBA guidance update has made us more confident that the RBA has reached the end of its rate hike cycle, although the risk of a final rate hike cannot be completely ruled out.
We expect the RBA to start cutting rates during the second half of this year. Unlike other major central banks such as the Fed, the RBA is expected to take longer to lower rates.
On the contrary, a less favorable development for the Australian has been the recent sharp fall in the price of iron ore, which has continued to plummet so far this month. After peaking at the beginning of the year, the price of iron ore has since fallen by almost 30%, which continues to pose downside risks to the Australian dollar in the near term.
Source: Fx Street
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