Australia RBA Cash Target - Unexpectedly Hold Rates lead to rally in AUDUSD

Last night February 6th at 21:30 EST (02:30 GMT on February 7th) the RBA released their Interest Rate decision. Out of the 27 analyst estimates only 3 expected the RBA to hold rates steady at 4.25%. The other 24 expected them to cut 25 basis points to 4.00%. They surprised the market by not cutting interest rates and instead holding rates steady at 4.25%. The AUDUSD forex pair rallied over 120 pips on the news. Other Australian Dollar pairs: AUDJPY, EURAUD has similar gains.

The past 2 meetings the RBA has cut rates by 25 basis points each meeting. The analysts were roughly split in estimating they would do these cuts each time with about half predicting a cut and the other half predicting the RBA to hold. This time nearly all the analysts jumped on the band wagon and predicted a cut. However these predictions were quite backward looking as since the last FOMC meeting on January 25th 2012 and the NFP on this past friday, market sentiment has in general been alot better. An article appeared from Sydney Morning Herald just before Sunday night's Retail Sales report about the likelihood of a RBA rate cut diminishing, however no analysts modified their expectations over the next day before the RBA announcement.

Here is the 1 minute chart of the AUDUSD:

Here the 5 minute charts of AUDUSD and EURAUD. EURAUD dropped on the news but during the European Session some positive developments on situation in Greece turned the pair aroung. The AUDJPY got a further lift when the Japanese Yen started to weaken through out the day: