RBA Cut Australian Interest Rate By Half A Percent
The RBA (Reserve Bank of Australia) has cut the key rate down to what is a two-year low; the Australian interest rate is now 3.75 percent after previously being set at a level of 4.25 percent. This change in the key rate represents the biggest reduction in the last three years for Australia who’s economy is struggling to accelerate in the face of global financial market issues.
AUD/USD is trading at a near 1% drop since the decision came out and is currently consolidating losses around 1.0330 after covering 110% of the ADR at 110 pips. The aforementioned consolidation price action is currently seen at the 61.8% Fibonacci retrace of 1.0224 – 1.0473. AUDUSD volatility has seen a decline over the past 10 days (see graph below) but could be set to increase after this rate cut.
The following is an excerpt from the rate statement by Glenn Stevens – Governor: Monetary Policy Decision
“At its meeting today, the Board decided to lower the cash rate by 50 basis points to 3.75 per cent, effective 2 May 2012. This decision is based on information received over the past few months that suggests that economic conditions have been somewhat weaker than expected, while inflation has moderated”.
Click the following link for the full RBA Rate Statement
The AUDUSD H1 chart below shows the Forex market reaction as the Australian interest rate was cut by half a percentage point.
AUDUSD 10 Day Volatility