With the recent pessimism concerning the coronavirus (COVID-19) outbreak in Victoria, the Reserve Bank of Australia’s (RBA) monetary policy decision, at 04:30 GMT on Tuesday, become the key for the AUD/USD traders.
While the Aussie central bank has already shown the intention to keep the interest rates near the record low of 0.25%, no major forecasts are supporting an increase in the Quantitative Easing (QE). Though, the recent recovery in Aussie economics confronts the pandemic woes at home to probably push Governor Philip Lowe and the company to strike a dovish tone.
Analysts at Westpac provide key details of the RBA’s fight against the virus and probable outcome:
No change in the stance of policy is expected at the August RBA meeting. A full discussion of the outlook and risks will follow on Friday as the RBA releases its latest Statement on Monetary Policy. Recent RBA commentary has indicated skepticism over policy options such as negative interest rates and FX intervention. But Australia’s deteriorating economic outlook means the topic needs to be addressed.
TD Securities, on the other hand, expect no major surprises from the event:
RBA Board Meeting should have the target cash rate remaining at 0.25%. The Minutes of the July meeting and the Governor's speech released on 21st July indicated the door is shut to further policy easing, the Minutes concluding there is “no need to adjust the package of policy measures in Australia in the current environment”. Otherwise, on Tuesday the market will look to get a flavor of the Bank's latest set of forecasts for GDP, CPI and unemployment that will be published on Fri.
How could the RBA decision affect AUD/USD?
AUD/USD picks up the bids near 0.7125 by the press time of early Tuesday's Asian session. In doing so, the aussie pair snaps the previous two-day losing streak. The reason could be traced from the latest swing in the risk-tone as well as upbeat data concerning Australia’s Retail Sales.
Even so, the bulls are cautious amid the latest recovery in the US dollar and strict lockdown conditions in Victoria. While the latest COVID-19 figures for the American and Australia both cite a bit of relief, the pandemic still looms over the respective economies and hurt the growth outlook. While the recent data have been price-positive, odds of witnessing future weakness in the figures, due to the virus, can’t be ruled out. Should the policymakers convey this challenge, the AUD/USD pair may have to extend the last two-day declines. Alternatively, any optimism can add to the immediate gains but will be curtailed unless backed by the fading of the virus woes.
Technically, an ascending trend line from May 22, currently around 0.7075 precedes the 0.7065/60 support-zone, comprising June 10 high and July 24 low, to restrict the pair’s near-term downside. Alternatively, bulls have to dominate past-0.7200 to regain market confidence.
Key quotes
AUD/USD: Off one-week low to regain 0.7100, eyes RBA
AUD/USD Forecast: At risk of losing further ground
RBA Preview: COVID running a muck? An Exy Aussie? Nah, no worries mate!
AUD/USD: Rebound in Aussie exports fails to lift the AUD
About the RBA interest rate decision
RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.
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 assets. 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 Open Markets 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. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD bounces to 0.6450, shrugs off mixed Australian jobs data
AUD/USD is rebounding to test 0.6450 amid renewed US Dollar weakness in the Asian session on Thursday. The pair reverses mixed Australian employment data-led minor losses, as risk sentiment recovers.
USD/JPY drops to test 154.00 on Japan's intervention warnings
USD/JPY extends losses to test 154.00 in Asian trading on Thursday. The pair is undermined by the latest US Dollar pullback, Japan's FX intervention risks and a softer risk tone. Focus shifts to more Fedspeak and US data.
Gold price finds buyers again near $2,355 as USD licks its wounds
Gold price is attempting a tepid bounce in the Asian session, having found fresh demand near $2,355 once again. Gold price capitalizes on a softer risk tone and an extended weakness in the US Treasury bond yields, despite the recent hawkish Fed commentary.
Manta Network price braces for volatility as $44 million worth of MANTA is due to flood markets
Manta Network price was not spared from the broader market crash instigated by a weakness in the Bitcoin market. While analysts call a bottoming out in the BTC price, the Web3 modular ecosystem token could suffer further impact.
Investors hunkering down
Amidst a relentless cautionary deluge of commentary from global financial leaders gathered at the International Monetary Fund and World Bank Spring meetings in Washington, investors appear to be taking a hiatus after witnessing significant market movements in recent weeks.