The Australian dollar has weakened, falling to US65.57¢ after reaching a three-week high of US65.76¢. This decline follows the release of economic data indicating slower-than-expected growth. The subdued figures have prompted investors to reassess their expectations for future interest rate adjustments by the Reserve Bank of Australia (RBA).
Bond yields retraced earlier gains in response to the economic news. The three-year bond yield, which is particularly sensitive to policy changes, decreased by 8 basis points to 3.88 per cent. Similarly, the 10-year yield eased by 6 basis points, settling at 4.59 per cent. Earlier in the day, both yields had reached multi-month highs before the market adjusted to the growth data.
Money markets are now indicating a reduced probability of a rate hike by the RBA in the coming year. The implied chance of a rate increase has fallen to 57 per cent, down from a high of 97 per cent prior to the data release. Additionally, markets are pricing in a 12 per cent chance that the central bank may cut the cash rate to 3.35 per cent between now and March. The RBA is widely anticipated to maintain the cash rate at its current level of 3.6 per cent at its upcoming meeting next week.
