The Reserve Bank of Australia (RBA) surprises by keeping monetary policy unchanged, while the US delays imposing higher tariffs.
The Australian dollar gains strength early on Tuesday, as markets react to the Reserve Bank of Australia's (RBA) unexpected decision to keep interest rates unchanged at 3.85%. The NFIB Business Optimism Index for June will be the only release on the US economic agenda, while investors will continue to focus on news related to US tariffs.
The Reserve Bank of Australia (RBA) announced early Tuesday that it left the official cash rate (OCR) unchanged at 3.85% after the conclusion of the monetary policy meeting in July, contrary to market expectations of a 25 basis point rate cut. In its monetary policy statement, the RBA indicated that it could wait for more information to confirm that inflation is still on track to reach sustainable levels of 2.5%. In the press conference following the meeting, RBA Governor Michelle Bullock stated that it is appropriate to adopt a cautious and gradual stance on monetary easing, but added that further rate cuts could be expected if inflation slows in line with their forecasts. After losing nearly 1% on Monday, the AUD/USD pair reversed its direction following the RBA's surprise leaning towards tightening. At the time of writing this report, the pair was up about 0.7% during the day at the 0.6535 area.
The White House announced late Monday that US President Donald Trump signed an executive order to delay the implementation of tariffs until August 1. However, President Trump stated that they will impose 25% tariffs on Japan and South Korea. "If you decide, for any reason, to raise your tariffs, any number you choose to increase them will be added to the 25% that we impose," Trump said in messages sent to Japan and South Korea. Major US stock indices closed in negative territory on Monday, and the US dollar index (DXY) rose to its highest levels in nearly two weeks, up more than 0.5% on a daily basis. Early Tuesday, the US dollar index (DXY) is recording a corrective decline and fluctuating below the 97.50 area, while US stock index futures are trading slightly higher.
The EUR/USD pair is rebounding and trading near the 1.1750 area after losing nearly 0.6% on Monday.
Japanese Prime Minister Shigeru Ishiba stated early Tuesday that Japan was unable to reach an agreement with the US because the country continued to defend what it needed to defend. He also added that they will continue the dialogue and seek an opportunity to reach an agreement that benefits both countries. After rising more than 1% on Monday, the USD/JPY pair is fluctuating within a narrow price range above the 146.00 area early Tuesday.
The GBP/USD pair gains momentum and rebounds towards the 1.3650 area in the European morning after Monday's decline.
Gold opened the week with a bearish tone and fell below the $3300 area before erasing its losses late Monday. The XAU/USD pair remains in a consolidation phase around the $3330 area early Tuesday.
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