Monthly Wrap: AUD – Australian dollar volatile as RBA shifts to neutral stance

Key takeaways:  

• RBA shifts away from tightening bias 
• Falling unemployment supports AUD 
• AUD monthly lows: £0.51, $0.64, €0.59, NZ$1.06, CA$0.88 
• AUD monthly highs: £0.51, $0.66, €0.60, NZ$1.09, CA$0.89 

The Australian dollar was muted at the start of March, following the publication of the latest GDP data. In the fourth quarter of 2023, the economy expanded by 0.2% on a quarterly basis, below forecasts of 0.3% growth. 

Business confidence data for February printed above forecasts, but pressured the ‘Aussie’ by reinforcing a pessimistic outlook. High borrowing costs and elevated inflation remained a thorn in the economy’s side, undermining AUD. 

This was followed by the Reserve Bank of Australia’s (RBA) latest interest rate decision. While the RBA kept rates unchanged as expected, a dovish pivot to its forward guidance induced heavy selling pressure.  

Towards the end of the month, February’s unemployment rate unexpectedly dropped to 3.7%, bringing some strength to the Australian dollar. 

At the start of April, AUD saw mixed trade following the publication of the RBA’s latest meeting minutes. Between a now neutral stance and removal of rate hike discussion, the Australian dollar saw choppy trade as investors adjusted their rate cut bets. 

Looking ahead over the coming month, there are a couple of notable data releases which may impact the Australian dollar.  

In mid-April, Australia’s jobs data for March is due for publication. The unemployment rate is forecast to have risen to 4%, which could weigh heavily on the Australian dollar if it further weakens the case for another RBA rate hike. 

The latest Australian inflation data is then due towards the end of April. Headline inflation is forecast to have cooled notably in the first quarter of 2024, decelerating to 3.4% from 4.1%. This could stoke rate cut bets, and weaken the ‘Aussie’.