Alike every first Tuesday of the month, the Reserve Bank of Australia (RBA) is up for conveying the latest monetary policy meeting and Interest Rate Decision around 03:30 AM GMT.
The RBA is expected to keep the benchmark interest rate unchanged around 0.10% and mark no changes to its weekly bond purchase of $4.0 billion.
The recent weakness in the Aussie Q3 inflation data and firmer Wage Price Index seems to help the policymaker to maintain the status quo.
Though, fears emanating from the South African covid variant warrant AUD/USD traders to pay close attention to the RBA Rate Statement for clear directions, considering the Aussie pair’s oversold performance around the 2021 low.
Ahead of the event Westpac said,
As such, the focus will again be on the wording of the Governor’s decision statement, particularly any assessments of the latest round of economic data, including the Q3 national accounts, and the shifting external environment, particularly with respect to price inflation in developed economies. The Bank’s following meeting, on February 1 next year, will likely see more meaningful shifts with a scheduled review of the bond buying program expected to see purchases scaled back from $4bn/week to $2bn/week prior to a wind-down of the program by mid-May.
On the same line, FXStreet’s Valeria Bednarik says,
Most likely, the Reserve Bank of Australia will include a cautious note amid the newly discovered Omicron coronavirus variant, which led to travel restrictions in the country, although no fresh lockdowns were announced. Finally, the central bank has maintained an optimistic outlook of the economic progress within the ongoing pandemic, something that should not surprise investors.
How could the RBA decision affect AUD/USD?
AUD/USD pokes intraday high around 0.7055 ahead of the key RBA decision during early Tuesday. The Aussie pair seems to brace for the RBA’s likely downbeat comments amid cautiously optimistic markets. It should, however, be noted that Australia Health Minister Greg Hunt recently cheered the nation’s covid vaccine jabbing and hence hints at the firmer RBA statement.
That said, AUD/USD traders are likely to pay little attention to the RBA verdict unless the central bank cites any major catalysts or hints at February tapering of the bond purchases. Even so, optimism towards the national vaccination program may help the pair to keep the latest gains after the monetary policy decision.
Technically, AUD/USD keeps the bounce off November 2020 bottom amid oversold RSI conditions. However, the corrective pullback remains inside a five-week-old descending trend channel. While August 2021 bottom around 0.7105 lures short-term buyers ahead of the event, a convergence of the 10-DMA and upper line of the stated channel, near 0.7125, becomes a tough nut to crack for the bulls.
Key quotes
AUD/USD Price Analysis: Bulls look to test 0.71 the figure
AUD/USD bears are denied more downside, risk-on into RBA
Reserve Bank of Australia Preview: Market players looking for tightening hints
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.
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