RBA overview
The Reserve Bank of Australia (RBA) is all set to announce the latest monetary policy decision at 3:30 am GMT on Tuesday. The Aussie central bank is widely anticipated to hold present monetary policy unchanged. However, the rate statement will be particularly important to traders while seeking clues of future rate cuts and the strength of the export-oriented economy.
Market expectations
TD Securities follows general market consensus while anticipating no fireworks at today’s RBA meeting as it says:
RBA OIS is priced for the cash rate to remain at 0.75% for the Nov meeting in line with analyst consensus. More importantly, the market will scan the statement for clues on potential forecast changes in Friday's SoMP. We anticipate no changes to CPI or unemployment, but we do expect downward revisions to 2020 GDP following Q1 and Q2 misses keeping the 'gentle turning point' narrative intact.
The Australia and New Zealand Banking Group (ANZ) also anticipates no change in the RBA’s monetary policy but holds a bearish bias for future actions:
While we do not expect a rate cut next week, it looks likely that the RBA will have to ease monetary policy in 2020. We continue to expect another two 25bp cuts, one in February and one in May, as the onus stays on monetary policy to support the domestic economy. The Q3 CPI was in line with the Bank’s forecasts, but it is the activity and labor market outlook that are key for the RBA at the moment. The 4½% target for the unemployment rate remains a long way off. Governor Lowe has noted on a number of occasions that rates are set to stay low for an extended period, and he repeated this week that “the Board is prepared to ease monetary policy further if needed.
How could the RBA decision affect AUD/USD?
Given the present positive sentiment surrounding the “Phase One” trade deal between the United States (US) and China, markets are less likely to react to the RBA’s inaction. However, dovish clues concerning Friday’s Statement of Monetary Policy (SoMP) can exert additional downside pressure on the Aussie.
Technically, an upward sloping trend line since mid-October, at 0.6878 now, will keep short-term sellers away, a break of which could recall 100-day Simple Moving Average (SMA) level of 0.6850 and late-October low near 0.6810 on the chart. Meanwhile, July 10 low near 0.6910 and 200-day SMA level of 0.6953 hold the key for pair’s run-up to 0.7000 round-figure.
Key Notes
AUD/USD bounces off three-week-old rising trendline ahead of RBA
AUD/USD Forecast: Waiting for the RBA’s decision on monetary policy
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.
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