The Reserve Bank of Australia cut their Official Cash rate by 75 basis points and caught the market by surprise after a 50 bps cut was expected.

Taken from FXPedia:

The Cash Rate is the rate financial institutions charge other financial institutions for overnight loans in the Australian banking system. This is a fundamental trend-setting rate and changes to this rate are reflected in other interest rates including commercial bank rates. The Cash Rate Target is the rate that the government feels is appropriate given the current economic conditions.

After the RBA hiked the rates in the past two years, Australia received an influx of currency flows to take advantage of their record high interest rates. The AUD was one of the favorite currencies to buy and the Cash rate  reached 7.25% on March 2008. After that four swift cuts (25bps 100bps, 50bps and now 75 bps) have reduced the Cash rate to 5.25%.

For more Australian Economic Indicators visit FXEconostats Australian Data

All Major Central Banks around the world are cutting their rate with the intention of restoring economic growth and trying to avoid an even deeper recession. Even the Bank of Japan which at 0.50% had the lowest rate in the developed world, was forced to cut by 20 basis points. The Japanese benchmark is now 0.30%.

Filed under: Forex Graph Commentary