Aussie steady ahead of rate decision

The Australian dollar is stronger versus the US dollar ahead of the Reserve Bank of Australia’s rate decision tonight.

Interest rates are currently set at 2.5%, an all-time low, and the consensus is for rates to remain unchanged. After lowering interest rates last month, Glenn Stevens of the Reserve Bank of Australia (RBA) stated that, now the mining boom is over, focus is now on stimulating domestic business. Inflation ticked up by 0.2% in September, bringing the yearly rate to 2.1%. If inflation dips below the 2% mark it could increase pressure on the RBA to trim rates even further.

The HSBC Chinese manufacturing purchasing managers’ index came in at 50.2 in September. Although lower than the estimated 51.2, any reading above 50.0 indicates an expansion in the sector so this report tells us that China is on track for a gradual slowdown.

In the US the Democrats and the Republicans have yet to reach a decision over the debt ceiling. If the parties are unable to reach an agreement by 5am (London time), the US government will have to shut down non-essential departments – this could mean an Australian dollar rally.

Spot FX AUD/USD chart

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