The Australian dollar or AUD rate soared to more than 0.7100 against the USD in an asian session trading today (3/May). The Reserve Bank of Australia (RBA) announced a larger hike than the consensus forecast.
That also signalled readiness to raise rates further to help fuel a surge in inflation. AUD/USD began to recede again as it entered the European session as traders reconsidered the implications of the RBA's hawkish stance this time around amid a range of global risks.
However, the bias was already slightly more bullish than last week period. The Reserve Bank of Australia decided to raise their interest for about 25 basis points. So, that moves to 0.35 percent.
Before ,the market participants had previously only expected a rise of up to 0.25%. Its chairman also expressed an intention to raise the rates continuously until Australia's inflation value is under control.
Australian Obligation Yields Jumped After That
The board is committed to implementing what needs to be done in the future. That was to ensure that inflation in Australia returns to target over time as the RBA Governor Philip Lowe said,
That will require the further increases in interest rates over the foreseeable future. Following the announcement, the yield on the 3Y Australian bond jumped up to 16 basis points.
It means that the number jumped to 2.98% where it is the highest level since April 2014, and the Yield on 10Y Australian bonds topped 3.30%. The announcement also provided the basis for the Australian dollar's rebound.
That is why; the AUD/USD level soared to 1.4%. The market Futures are currently taking into account a very aggressive hike cycle for the RBA, and the AUD has gained support so far.
This statement was said by Karl Steiner where he is a Head of Quantitative Strategy at SEB. Other agenda items at the RBA meeting include a Quantitative Tightening (QT) plan that will begin by halting reinvestment of maturing bonds.
The Quantitative Tightening will be Minimum
However, the RBA's QT effect is likely to be minimal. The cause is that very few bonds in its portfolio are due until next year. The RBA's statement underlines the resilience of the Australian economy.
It looks like the growth of economy there will be better and higher. They hailed improvements in the labor market that have pushed the unemployment rate to its lowest level in nearly 50 years.
The RBA reiterated that Australia's growth outlook remains positive. It is despite a number of uncertainties related to COVID-19 in China, the war in Ukraine, and the slump in purchasing power due to higher inflation.
The GDP Growth can Reach for More than 4 Percent
The Reserve Bank of Australia expects that the GDP growth in that country may reach 4.25 per cent during 2022 and 2% during 2023. It will depend on some situations ahead.
Elsewhere, Data on changes in the total number of workers (Employment) measuring changes in the total number of workers. It is released along with data on the percentage of changes in the unemployment rate.
Unlike other major currency countries that release this data monthly, New Zealand stated it quarterly. The data shows a different number in the percentage of the total amoint of workers.
That is also the percentage of unemployment number compared to the previous quarter. In the fourth quarter of 2021, the number of jobs in New Zealand rose by 0.1% compared to the previous one.
It is lower than the forecast of 0.4%, and the lowest since the third quarter of 2020. The unemployment rate fell to 3.2%, lower than the 3.3% forecast, and the lowest since 1985. The participation rate stood at 71.1% as well.
