When is the RBA rate decision and how could it affect AUD/USD?

RBA overview

The Reserve Bank of Australia (RBA) is all set to announce the latest monetary policy decision at 4:30 am GMT on Tuesday. The central bank is widely expected to keep policy rates unchanged at 0.25% and retain the yield curve control program launched in March. 

Focus on yield curve control

The policy focus for today’s meeting will be on the Yield Curve Control (YCC ) policy, according to analysts at Australia New Zealand (ANZ) bank. 

We will be interested to see whether the RBA will signal that further tapering is on the way. There is a natural tapering this week and next, with the Easter holiday reducing the number of days on which the RBA will purchase bonds. 

We think the RBA will stick with four days of purchases after the Easter break, but maintain purchases at AUD 2 billion per day for a while longer.

Such a move would signal that the RBA is happy with a relatively steep bond curve and current semi spreads to bond. In our view this would be interpreted as a tightening of policy relative to what other countries are doing, with unwanted implications for curve slope, spreads and potentially the AUD.

Markets price in future rate cuts

The ASX 30 day interbank cash rate futures implied yield curve shows investors expect the RBA to reduce the cash rate by 25 basis points in July. 

Impact on AUD

AUD/USD is better bid around 0.6120 at press time and will likely extend gains if the RBA's policy statement shows bigger tapering is on the way. Daily bond purchases were reduced from AUD 3 billion to AUD 2 billion following the achievement of the YCC target last week. 

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.