AUD/USD: Aussie crashes back through 0.70

The Australian dollar was lower against the US dollar on Tuesday afternoon amid a flight to quality and a dovish set of meeting minutes from the Reserve Bank of Australia that indicated the call not to cut interest rates was a close one.

AUD to USD was lower by 25 pips (-0.37%) to 0.6990 with a daily price range of 0.668 to 0.672 as of 3.30pm GMT. An afternoon rebound undid some of the sharp early losses that took AUD/USD crashing back below the key 0.70 figure. Weekly losses now stand at -0.36%.

The Australian dollar

The Aussie crashed back below the 0.70 level in a double whammy of dovish RBA minutes and renewed coronavirus fears but had almost recovered the key figure in afternoon trading as risk sentiment improved.

The main takeaway from the RBA minutes was that the decision to keep rates on hold at 0.75% was a close call. Policymakers weighed up the cutting Australian interest rates to a fresh record low of 0.5% but decided not to because rates are already “very low”. If anything the minutes displayed the lack of policy space central banks have in order to react to any new crisis. Although the central bank appeared content with the state of the Australian economy after improved jobs and inflation data, it was agreed a further rate cut could speed progress towards employment and inflation targets. The Board did mention the coronavirus but said it was too early to assess the impact.

The US dollar

Slightly disappointing housing data took the edge off the best regional manufacturing data since May last year. The NAHB Housing Market index slipped to 74 when expectations were for it to stay steady. That followed an impressive NY Empire State Manufacturing index with a shock jump to 12.9 when a smaller rise to 5 from 4.8 had been expected.

Tomorrow sees the release of Federal Reserve meeting (FOMC) minutes where because of the testimony on Capitol Hill from Chair Jerome Powell, the comments on the economy might be a little stale. The focus in markets might be on the policy review and any changes to the 2% inflation target.

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