When is the RBA Interest Rate Decision and how could it affect AUD/USD?

The Reserve Bank of Australia (RBA) will announce the latest monetary policy decision at 03:30 GMT on Tuesday. The central bank is expected to keep interest rates unchanged at a record low of 0.10% and maintain its yield curve control policy (YCC). 

No big changes expected

With the global economy expected to chart a swift recovery on potential coronavirus vaccines, the central bank is likely to maintain the status quo and review aggressive easing implemented throughout the year and more recently in November. 

Australia's economic data has improved since the last meeting and the government has been relatively successful in controlling the second wave of coronavirus. As such, there is little need to do more in the short-term. The policy statement is likely to reiterate that the economy has consistently outperformed throughout the year,

However, the central bank may attempt to talk down the exchange rate and keep the doors open for more easing, having boosted stimulus last month mainly to counter the strong Aussie dollar. The RBA cut the cash rate to 0.1%, from 0.25% last month. The target for the yield on the 3-year government bond yield and the interest rate on new drawings under the Term Funding Facility was reduced to 0.1%. The central bank announced that it will buy AUD 100 billion worth of government bonds of maturities of around 5 to 10 years over the next 6 months. 

The AUD/USD pair will likely face selling pressure if the policy statement drops a direct hint of negative rates. RBA's Governor Lowe said last month that sub-zero rates might be implemented if other central banks made such a move. On the other hand, the bid tone around the AUD would strengthen if the policy statement projects strong economic recovery in 202 and talks about early exit from the quantitative easing (bond purchases). 

About the RBA 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.