After surprising the markets with a 0.25% rate hike in the last monetary policy meeting, the Reserve Bank of Australia (RBA) is up for another Interest Rate Decision around 04:30 AM GMT on Tuesday.
It’s worth noting the RBA is likely to throw dice on the dove’s side as traders remain divided over the Aussie central bank’s peak rate, despite major consensus favoring a no rate change announcement from the RBA. That said, the RBA’s benchmark rate is around 3.85% at the latest.
Given the recently mixed statements in the RBA minutes, as well as mostly upbeat inflation and wage numbers, not to forget the talks of policy pivot, the AUD/USD traders will be more interested in hearing about the end of the rate hike trajectory. The same makes today’s RBA crucial for the AUD/USD pair traders to watch for clear directions.
Ahead of the event, Analysts at ANZ said,
Last week we revised up our terminal rate call in Australia 4.35%, as we no longer see 4.10% as sufficient to bring inflation back to the target quick enough. Nonetheless, we see it as a line ball call whether the RBA hikes at today’s meeting or waits until July, though favor a hike today at the margin.
On the same line, FXStreet’s Matias Salord said,
Whatever decision the RBA takes, it is likely to keep the doors open to another rate hike. If it decides to pause, this would be considered a "hawkish hold". If the RBA increases the cash rate, it is unlikely to be a "dovish hike". While the AUD/USD could benefit from a rate hike, it is not necessarily a sustainable move. The upcoming Australian Q1 GDP report, due on Wednesday, will be an important factor to watch.
How could the RBA decision affect AUD/USD?
AUD/USD remains sidelined near 0.6620 while portraying the pre-RBA anxiety among Forex traders. Also challenging the risk-barometer pair is the mixed sentiment surrounding the Federal Reserve’s (Fed) next move and the US-China ties, as well as a light calendar and absence of Fed talks ahead of the next weekly FOMC monetary policy meeting.
That said, the RBA is likely to trouble momentum traders as most analysts on the table anticipate no rate change. However, the economic forecasts and talks surrounding the policy pivot rate will be crucial to watch for the Aussie pair traders to watch for clear directions.
Should the RBA shows readiness to extend the rate hike trajectory, or surprises the markets by doing the same in today’s RBA Rate Statement, the AUD/USD may have a further upside to trace. Until then, the AUD/USD may remain on the bear’s radar.
Technically, AUD/USD rebounds from the support line of a falling wedge established in late December 2022, as well as stays beyond the 61.8% Fibonacci retracement of October 2022 to February 2023, which in turn joins upbeat oscillators to favor the Aussie pair buyers. With this, the quote is all set to confront a convergence of the 50% Fibonacci retracement level and the 50-DMA, around 0.6660.
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 of 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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