AUD/USD flows: Pumped by Chinese equity and not dovish RBA statement

The RBA meeting on Feb 6th kept rates on hold at 4.35% as per our forecast. The RBA also left doors open for further tightening and continue to suggest data dependency to lead the future path. The key forward guidance statement of "Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks." has changed to "The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks, and a further increase in interest rates cannot be ruled out.". While market participants are reading such change in forward guidance to be hawkish, the forward guidance seems to only suggest data dependency remains and door remains open for tightening. We do not see the RBA to hike further because the room to balance between economics growth and inflation dynamics are minimal.

The AUD/USD got a shoot in the arm from regional sentiment pumped on supportive headline from the Chinese government. AUD/USD is 0.41% higher at 0.6509.