Lockdowns in Australia did not push the Reserve Bank to reverse its taper plans last night. The Australian dollar shot higher after the RBA announced it would proceed with its plans to reduce asset purchases this month. Investors were skeptical of the central bank’s rosy outlook, however. The RBA described the economic disruption of lockdowns as “only temporary” and will “delay, not derail the recovery.” With the central bank not expecting the economy to return to its pre-Delta path until the second half of next year, the sell-off in the Australian dollar reflects the market’s view that it will remain one of the most dovish central banks.
The European Central Bank meets Thursday, so we’ll touch on the ECB tomorrow. In the meantime, Eurozone economic data was mixed, with stronger German industrial production offset by weaker investor confidence. The expectations component of Germany’s ZEW survey dropped for the fourth month in a row to its lowest level since the pandemic began.
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