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RBA Reassures Markets Over Aussie Banks

In its latest semi-annual Financial Stability Review released overnight, the RBA sought to reassure markets over the health of the domestic banking sector. In light of the recent banking sector stresses seen in the US and Europe, the RBA noted that “Banks are well regulated, strongly capitalized, profitable and highly liquid”. The bank went on to note that this “leaves them well positioned to continue lending to Australian households and businesses.”

In particular, the RBA was keen to stress that the domestic banking sector is in much better health than a decade ago. Additionally, the RBA said in its report that capital and liquidity positions in Australian banks are above regulatory requirements.
 

RBA Pauses Hikes – Not Necessarily Done However

Earlier this week the RBA was seen pausing its tightening cycle on the back of the recent inflationary drop seen last month. Governor Lowe explained that the bank wants time to assess the impact of recent policy tightening and to allow for the lag to fully translate. However, despite the pause, the RBA noted that further tightening might well be necessary and will be data dependant, linked to the trajectory of the inflation path.
 

Technical Views

AUDUSD

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The pair continues to hover around the .6681 level. The recent grind higher within the bull channel, however, can be viewed as a bear flag suggesting risks of a fresh downside break targeting .6535 next. 

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