Australian Dollar Strong Despite Dovish Speech from RBA Chief

The Australian dollar rose against all other most-traded currencies today with the exception of the very strong New Zealand dollar. Australian macroeconomic data released on Wednesday was supportive of the Aussie but the speech of the central bank’s head was dovish, limiting the upside momentum for the currency. As of the time of writing, the Aussie has lost its gains versus the US dollar but rebounded against the New Zealand dollar.
The Australian Industry Group and HIA Australian Performance of Construction Index climbed from 55.3 in November to 57.6 in December and January. An increase above the 50.0 level means that the sector was expanding at an accelerating pace.
The Australian Bureau of Statistics reported that the number of building approvals climbed by 10.9% in December from November. It was a far bigger increase than 3.2% predicted by experts and 3.4% registered in the previous month.
Yesterday, the Reserve Bank of Australia drove the Aussie lower, expanding the size of the asset-purchase program unexpectedly and signaling that it does not plan to start raising interest rates anytime soon. RBA Governor Philip Lowe reiterated such viewpoint in today’s speech, stating:

It is going to be some years before the goals for inflation and unemployment are achieved. So it is premature to be considering withdrawal of the monetary stimulus.

He added further:

Before increasing the cash rate, the Board wants to see inflation sustainably within the 2 to 3 per cent target range. Meeting this condition will require a tighter labour market and stronger wages growth than we are currently forecasting. It is difficult to determine exactly when this condition might be met but, based on the outlook I have discussed today, we do not expect it to be before 2024, and it is possible that it will be later than this.

On a more positive note, Lowe said that the central bank has no intention to cut rates into the negative territory:

The Board has no appetite to go into negative territory and has done as much as it reasonably can with interest rates.

AUD/USD was about flat at 0.7609 as of 9:18 GMT today after rising to the daily maximum of 0.7626 earlier. AUD/NZD traded at 1.0576, bouncing from the session minimum of 1.0540. EUR/AUD declined from 1.5830 to 1.5793.
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Original from: www.earnforex.com