In a significant move, the Reserve Bank of Australia (RBA) reduced interest rates for the first time since 2020, signaling a positive step for the Australian economy. The decision, announced on Tuesday, was anticipated by market analysts. Higher interest rates had successfully slowed economic activity and curbed inflation, aligning with the central bank's objectives. However, the RBA clarified that this rate cut does not signal the beginning of a series of reductions.
The Australian Dollar/US Dollar (AUD/USD) pair remained stable around the mid-0.6300s, maintaining its position within a familiar range. On Monday, the pair reached a two-month high, underscoring the impact of the RBA's hawkish rate cut. The move was interpreted as a positive factor for the AUD/USD, bolstered further by subdued US Dollar price action and a prevailing risk-on mood in the market.
Meanwhile, the New Zealand Dollar experienced selling pressure on Tuesday, declining 0.58% against the US Dollar to 0.5700. This drop came after a rally last week that saw the currency climb to its highest levels since late January, surpassing 0.5730. The 100-day simple moving average (SMA) for the New Zealand Dollar stands at 0.5825, adding a technical dimension to its recent movements.
Despite expectations from some quarters, the RBA's decision to cut interest rates surprised certain market participants. The strategic rate reduction is viewed as a positive development for the Australian economy, potentially accelerating growth by making borrowing more affordable. Market players are now keenly observing if the AUD/USD can break above the 0.6300 level to sustain its upward momentum.