Australian dollar gains after RBA minutes

On Tuesday morning, we can observe increased volatility in the Japanese yen market due to the decision of the Bank of Japan regarding the level of interest rates. BoJ left interest rates at the current level (-0,10%), thus maintaining its current rhetoric of loose monetary policy. The bank's statement indicates that bankers remain dovish due to the uncertainty about the economic situation.

In response to the decision, the yen lost significantly, but expectations for next year remain positive for an increase of 20 basis points – up to 0,1%. USD/JPY quotes are gaining more than one percent on a daily basis, and the rate managed to break above the level of 144,50.

AUD growth after RBA minutes

In the morning we also learned about the so-called "minutes" from the last meeting Bank of Australia. Even though the RBA kept rates at 4,35%, records showed that bankers were considering the possibility of another interest rate increase. Such rhetoric was dictated by the fact that inflation is not expected to return to the target until the end of 2025, while it was previously believed that this would happen sooner - in mid-2025. Therefore, the RBA's recent decision to maintain interest rates represents a pause, not an end to the tightening cycle.

The minutes of the last meeting lacked any statements regarding potential rate cuts in 2024. The hawkish tone of the RBA minutes supports the Australian currency, which is one of the top G10 currencies this morning.

Will the ECB make the first rate cuts soon?

As for the main currency pair, volatility is low. Yesterday we learned worse data from the IFO institute from Germany, however EUR / USD exchange rate managed to stay above the level of 1,09. The euro is probably supported by speculation that the European Central Bank will make its first interest rate cuts later than the Fed. In the morning, EUR/USD continues its upward movement that started yesterday.

Although Friday's session brought a strong pullback in the EUR/USD rate and it seemed that the movement was "drawn" after the weekend, yesterday the session ended slightly higher, and today the increases continue. If the current sentiment continues, it may happen in the short term we will see another attack on the resistance zone at $1,10, where there was a pullback before the weekend. Support remains around the round level of 1,0900, where the average EMA 100 determined by the H1 interval is located. Only a break below could pave the way towards the key support zone at 1,0760.

The Polish zloty loses slightly in the morning, the scale of the movement reaches between 0,05% and 0,45% against the main currencies. The GBP/PLN pair is gaining the most, while USD/PLN is gaining the least. However, if the upward trend in EUR/USD continues, the zloty may regain strength. However, when EUR/USD reverses and resumes its downward move, the zloty may come under pressure. At the time of preparation of this commentary, a dollar costs PLN 3,9605, a euro - PLN 4,3342, a franc - PLN 4,5720, and a pound - PLN 5,0280.

Source: Łukasz Stefanik, XTB