Australia Lowers Interest Rate

On an early Tuesday morning, at 12:30am, October 2nd, many investors were caught off guard as the Reserve Bank of Australia (RBA) released their Interest Rate announcement.

Down 25 basis points to 3.25, Australia hasn’t seen rates this low since late 2009.

The release early Tuesday morning made one thing clear; Australia is still in a cycle of lowering rates. Domestic rates have now been lowered a total of 1.5% in the past year.

Australia is still holding high interest rates compared to other countries. They are significantly lower than they were in 2008 when they were 7%+ and in 2010/2011 they were 4.75% for a long stretch.

Here’s a chart of how AUD’s rates compare with other world economies.

 

 

The RBA Governor, Glenn Stephens stated “At today’s meeting, the Board judged that, on the back of international developments, the growth outlook for next year looked a little weaker,”. Ouch, Australia took a hit with this statement and we have seen the impact of it in today’s market conditions.

The AUD/USD sank about 100 pips or so already and with a remark like “the growth outlook for next year looked a little weaker,” we could see some more AUD weakness as the month progresses.

Technical signals show that the AUD/USD is at critical daily support but, the fundamentals have power to override the technicals and I imagine we will continue to see AUD weakness in the near future.

To read the whole report released from the RBA today, visit this link.

Here is a chart of Australian Interest Rates changes:

Source: tradingeconomics.com

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