Unexpected Surprise From RBA, AUD/USD Boosts!

 The market welcomed the policy announcement by the Reserve Bank of Australia (RBA) which maintained its plan to reduce bond -buying rates in early September.

At the August session policy meeting, the Australian central bank left interest rates unchanged at lows and targeted 3 -year bond yields at 0.10%.

Despite the increasing pressure from the resurgence of the coronavirus outbreak in Australia leading to the implementation of sanctions measures, the central bank is sticking with their plans to reduce bond purchases.

For now, the RBA will buy government bonds at $ 5 billion a week until early September and then lower it to $ 4 billion a week until at least mid-November.

In a follow-up statement, the RBA acknowledged that the recent increase in Covid-19 infection cases in Australia will disrupt recovery and economic growth is expected to slow in the third quarter.

However, previous experience has shown that after Covid-19 is successfully curbed, the economy will rebound quickly. In fact, before the current contagion, the Australian economy had considerable momentum and it is still expected to grow strongly next year.

According to the RBA, the economy has benefited from significant additional policy support and vaccination programs will also aid recovery.

RBA policymakers will maintain its flexible approach to bond purchase rates. The program will continue to be reviewed based on current economic and health conditions, as well as its implications for the expected progress in achieving full employment and inflation targets.

The Aussie dollar surged higher following this unexpected result, trading stronger at 0.74000 against the US dollar.

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