AUD/USD: RBA leaves the cash rate target unchanged - BBH

AUD/USD retraced some of yesterday's sharp losses triggered by the broad sell-off in risk assets, BBH's FX analysts report.

Board remains cautious on prospects for further policy easing

"As was widely expected, the RBA left the cash rate target unchanged at 4.10%. However, the RBA signaled it's in no hurry to resume easing. First, the RBA scrapped the sentence from the February statement that 'the Board remains cautious on prospects for further policy easing'."

"Second, the RBA noted 'the continued decline in underlying inflation is welcome, but there are nevertheless risks on both sides and the Board is cautious about the outlook'. RBA Governor Michele Bullock added during the press conference that the Board does not have '100% confidence' that inflation is moving sustainably towards the midpoint of the 2-3% target range."

"Bullock confirmed that the decision to hold was a consensus one and there was no explicit rate cut discussion. Cash rate futures scaled back odds of a 25bps cut at the May 20 meeting to 70% from 80% prior to the rate announcement. Ahead of the May policy meeting, two labor market prints and the Q1 CPI data will help shape near-term RBA rate expectations. The next Statement on Monetary Policy will also be published at the May 20 meeting."