The Australian dollar was up against the US dollar on Tuesday following a rate cut from both respective countries, one expected and one a complete shock. The RBA predictably cut rates at their scheduled meeting by 25 basis points while the US Fed cut rates by 50 basis points intra-meeting.
AUD/USD was higher by 73 pips (+1.11%) to 0.6611 with a daily price range of 0.6510 to 0.6645 as of 4pm GMT. AUD/USD rallied over 100 pips in early trading before paring the gains slightly, having touched resistance at 0.664.
The Australian dollar
The Aussie dollar continues to rebound off the decade lows reached last week, even as the RBA officially cut interest rates as was widely expected. The RBA cited the coronavirus uncertainty as the explanation for its action and said rates could head lower again if needed to support sustainable growth. Some shorter-term repo operations may also be in the works to ensure the Australian financial system has enough liquidity.
Markets had been expecting this action from the Australian central bank all year, first in reaction to the bushfires and then to the coronavirus outbreak. Now that the rate cut is in, the Aussie dollar is making up some of the lost ground as other central banks lay the groundwork for further policy easing, or in the case of the Fed do it.
The US dollar
To the surprise of global markets, the Federal Reserve announced an emergency 50 basis point rate cut, the largest since the financial crisis. The move was presumably designed to overdeliver on both timing and size. Markets had already been expecting the central bank to lower interest rates at its forthcoming meeting in March by the usual 25 basis points.
US benchmark interest rates now stand in a range of 1.00-1.25%. The rate cut comes following a tweet from US President Trump calling for a big cut. Once the rate cut was announced the President was back on twitter calling for the Fed to ease further.
In separate news, US Treasury Secretary Steve Mnuchin said the US was not considering a China tariff rollback but was looking at all options to help areas of the economy affected deal with coronavirus setbacks.
