AUD/CAD slides to two-week low as RBA holds policy rate at 4.35%

The AUD/CAD currency pair extended the losses from the previous trading day on Tuesday, while touching a fresh two-week low, after the Reserve Bank of Australia left its cash rate without change at 4.35% at its December meeting.

The decision came in line with investor expectations and followed a 25 basis point rate hike in November.

“Holding the cash rate steady at this meeting will allow time to assess the impact of the increases in interest rates on demand, inflation and the labor market,” RBA Governor Michele Bullock pointed out.

RBA policy makers noted that progress in driving inflation back down to the target range of 2% to 3% was slower than earlier projected. Australia’s underlying inflation still remained higher than forecast amid rising services costs.

The RBA Board once again said that whether further policy tightening was required would depend on the data and the evolving assessment of risks.

“The statement, in our view, was less hawkish than November’s and also less hawkish than we expected,” Barclays analysts wrote in an investor note, cited by Reuters.

“We continue to think the hiking cycle is over, though we do note the bank’s data dependent approach means the possibility of another hike after the Q4 inflation print.”

Meanwhile, CAD traders now shift their focus to the November data on Canadian services sector activity due out at 14:30 GMT today.

As of 8:01 GMT on Tuesday AUD/CAD was edging down 0.47% to trade at 0.8918. Earlier in the session, the minor Forex pair went down as low as 0.8912. The latter has been the pair’s weakest level since November 17th (0.8882).