Reserve Bank of Australia RBA

The Great AUD Con – rates drop

So traders around the world were astonished and some lost the house when the RBA cut rates.

As in with the ECB every time the rate was cut the currency started a fast downward wave as the liquidity in the market increases. But apart from a sudden 40 pip drop the AUD rose by to .7950 against the USD.

Chat room are still flush with questions as to why this phenomenon occurred and if everything in the southern hemisphere is upside down.

Traders that haven’t followed the RBA or the AUD closely would instinctively enter short bids on the rate cut but not so for close followers.

So here is why the AUD is pushing bulls in the wake of the rate cut:

  • The rate cut came in hours after negative Trade numbers and a level of negativity had already been absorbed by the AUD
  • Iron Ore prices are mending and on the way up
  • The RBA stated that this marks the end of an easing cycle

These are three strong statements to combat a rate cut effect.

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