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MNI RBA WATCH: Market Downgrades Further Hikes After Hold

(MNI) Melbourne

The RBA's widely-anticipated decision to hold was interpreted as dovish by the market.

The Reserve Bank of Australia board’s decision to hold the cash rate at 4.35% on Tuesday was widely anticipated, but the market response was swift, downgrading implied chances of further hikes in 2024.

While Governor Michele Bullock’s accompanying statement was little changed from November, when the RBA snapped a four-month pause with a 25bp hike, Australian dollar overnight index swaps fell 2-8bp across 2024 meetings (See chart). Commonwealth government bonds were also 4-6bp richer, while the Australian dollar fell to 0.6575 from 0.6605 against the U.S. dollar.

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The Reserve Bank of Australia board’s decision to hold the cash rate at 4.35% on Tuesday was widely anticipated, but the market response was swift, downgrading implied chances of further hikes in 2024.

While Governor Michele Bullock’s accompanying statement was little changed from November, when the RBA snapped a four-month pause with a 25bp hike, Australian dollar overnight index swaps fell 2-8bp across 2024 meetings (See chart). Commonwealth government bonds were also 4-6bp richer, while the Australian dollar fell to 0.6575 from 0.6605 against the U.S. dollar.

Keep reading...Show less