“The statement is likely to conclude with a mild easing bias. Indeed a small tweak of the words used in May could convey that. One possibility would be: ‘the Board views the inflation outlook as providing an opportunity for monetary policy to be eased further, if required to reinforce recent encouraging trends in household demand.’
“With the RBA likely to be, in our view, on hold at 2.00% for some considerable time and market pricing for the cash rate having now moved some way from the ~1.6% low; we think future moves in the Australian / US front-end interest rate differential are more likely to be driven by the ‘US-side’ of the equation”.
“As the final chart on the right shows, there has been a fairly tight relationship between the front-end interest rate differential and AUD/USD over the past year or so. That said, AUD/USD now looks a little low versus the interest rate differential”.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.