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Australian dollar skips a beat on new RBA Governor Michele Bullock’s appointment


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The Australian dollar dipped a fraction after the new RBA Governor was announced; Michele Bullock is seen as having an excellent central bank pedigree and RBA policy is likely to remain on course.

 

original-size.webpSource: Bloomberg

 

Daniel McCarthy | Strategist, | Publication date: Friday 14 July 2023

The Australian dollar eased after Australian Treasurer Jim Chalmers announced that Michele Bullock will take over as RBA Governor in September, replacing Mr Philip Lowe.

The currency has since recovered, and Australia’s S&P/ASX 200 equity index steadied to higher ground after a positive lead from Wall Street.

Ms Bullock has been the Deputy Governor of the bank since April 2022 and has been with the institution since 1985. She has a reputation as a leading economist in her own right.

The appointment is mostly viewed as a steady transfer of leadership at a critical time for monetary policy at the RBA.

Some monetary policy tourists in mainstream media have said that the bank has hiked rates unnecessarily aggressively. They might be disappointed with the new Governor if some of her recent comments reflect policy going forward.

In a recent speech, she remarked that the unemployment rate may need to get to 4.5% in order to take the heat out of inflation. It is currently 3.6%.

The implication for markets is that Australian monetary policy is likely to be managed in a similar fashion to the way that it has been for several decades, representing a steady hand at the wheel.

Interest rate futures tilted to a less hawkish outlook earlier this week with the six-month part of the curve erasing 25-basis points of tightening.

The markets now see only a slim chance of a hike by the RBA at its August meeting but a 25-basis point lift by year-end is anticipated.

AUD/USD intraday chart

 

original-size.webpSource: TradingView

AUD/USD

AUD/USD has been in a five-month trading range of 0.6459 – 0.6900 and it is testing the upper bound going into Friday’s trading session.

Resistance could be at the previous peak of 0.6900 and 0.6920 ahead of possible resistance in the 0.7010 – 0.7030 area.

On the downside, support might be at the breakpoints of 0.6818, 0.6806. 0.6803 and 0.6741 ahead of the prior low of 0.6595.

The latest rally saw the price break cleanly above all period daily Simple Moving Averages (SMA). This might indicate that bullish could evolve.

Those SMAs may provide support in the 0.6880 – 0.6920 area. It is rare for all of these SMAs to be clustered so close together and this might be hinting toward an emerging trend.

AUD/USD chart

 

original-size.webpSource: TradingView

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