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

After announcing three consecutive rate increases in the last meetings, the Reserve Bank of Australia (RBA) is up for another hawkish monetary policy outcome during the scheduled Interest Rate Decision around 04:30 AM GMT on Tuesday.

The RBA is expected to lift the benchmark interest rate by 50 basis points (bps) to 1.85% to fight inflation and match the tune with major central banks.

With this, the Aussie central bank could reach near the monetary policy hawks like the Fed and RBNZ, not to forget the BOE and BOC, even as the domestic numbers have been softer of late, which in turn makes today’s RBA rate hike interesting. The same makes the RBA Rate Statement will be more important to watch and forecast near-term AUD/USD moves.

Ahead of the event, Westpac said,

Westpac anticipates that the cash rate will rise to 3.10% by year end and then peak at 3.35% in February 2023. The expected path is another 50bps in September, then 25bps moves at each meeting after that (with no meeting in January).

On the other hand, FXStreet’s Valeria Bednarik says,

A smaller-than-anticipated hike should have a negative impact on the Australian dollar, sending AUD/USD sharply lower, particularly if the market sentiment deteriorates ahead of the announcement. A 75 bps hike, on the other hand, could fuel gains towards the 0.7100 figure. Whether gains will be sustainable or if the rally will be seen as a selling opportunity will depend on investors’ perception of risk.

How could the RBA decision affect AUD/USD?

AUD/USD retreats from the 1.5-month high as intraday sellers attack the 0.7000 threshold while refreshing the daily lows, snapping a two-day uptrend. The quote’s recent weakness could be linked to the market’s fears of recession and risk-negative headlines surrounding China.

Recently, Reuters quoted three sources familiar with the matter to mention that US House of Representatives Speaker Nancy Pelosi was set to visit Taiwan on Tuesday as the United States said it wouldn't be intimidated by Chinese threats to never "sit idly by" if she made the trip to the self-ruled island claimed by Beijing.

Additionally, the second consecutive quarterly decline in the US Gross Domestic Product (GDP) triggered a “technical recession” the previous week and weighed on the US dollar. On the same line were Fed Chair Jerome Powell’s indirect signals that the hawks are running out of steam.

It’s worth noting that the RBA’s hawkish path has limited upside scope considering the economic challenges for the biggest customer China and recently mixed data at home. However, the latest easy inflation in Australia and strong employment data keep AUD/USD bulls hopeful.

Hence, AUD/USD prices may remain firmer until the RBA signals slower rate hikes.

Technically, a joint of the 100-day EMA and the downward sloping trend line from April 20, around 0.7045-50, restricts immediate AUD/USD upside. Alternatively, pullback moves below 0.6910 could direct the bears towards the lows marked during mid-June and May, respectively around 0.6850 and 0.6830.

Key quotes

AUD/USD Price Analysis: Further upside hinges on 0.7045-50 resistance break, RBA 

AUD/USD bulls take a breather below 0.7050 ahead of RBA Interest Rate Decision

Reserve Bank of Australia Preview: How aggressive can it be?

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 raises the interest rates, it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view of the Australian economy and keeps the ongoing interest rate or cuts the interest rate, it is seen as unfavourable or bearish.