2016-09-22 12:22:51

Yesterday's decision by the US Fed to leave interest rate unchanged triggered sharp decline in the USD dollar, although such decision was expected.

The US Fed has made to understand that there are all grounds to raise the rate before the end of the year; however some representatives of the Fed system are not sure about the same chance next year, due to changes in the global economy, such as slowdown in Chinese economy, Brexit and mixed US macro-economic statistics. All these factors make the US Fed to postpone the rate hike.

The Fed has lowered forecast of GDP growth for 2016 from 2.0% to 1.8%. Long-term forecast of GDP growth was also reduced from 2% to 1.8%.

According to CME Group, probability of a rate hike in December is 60%. Nevertheless, many investors believe that the Fed will raise interest rates only in mid-2017. And instead of increasing the rate three times as has been planned for 2017, the rate may be raised only twice.

In response to the Fed's decision the price of gold and US stock indexes has sharply risen: Nasdaq Composite has grown by 1% to 6295.00, which was a record closing level. At the end of trading session on Wednesday Dow Jones Industrial Average rose by 0.9% and S&P500 – by 1.1%.

At the beginning of European session on Thursday, the Australian dollar is traded at the 2-week highs near the level of 0.7650. New Governor of the RBA Philip Lowe said today that the Bank would not make too “aggressive” making decisions in order to reach the target inflation range of 2% -3%. According to Lowe, fast growth of inflation, may have a negative impact on the financial stability of Australia.

Thus, the AUD/USD has received strong support, and it is likely that the pair will continue to grow in the short term. The next meeting of the RBA will be held on 4 October. The RBA has lowered the rate twice this year. Currently the rate is at the level of 1.5%.

AUD/USD: RBA will not make dramatic decisions in order to reach target inflation rate Fundamental analysis of 22/09/2016