When is the RBA Interest Rate Decision and how could it affect AUD/USD?
After announcing consecutive four 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 2.35%, mainly to fight inflation and match the tune with other major central banks. However, the odds of disappointing markets with 0.25% interest rate lifts aren’t out of the table and hence the AUD/USD traders are on the edge ahead of the meeting announcements.
With the stated rate increases, 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 mixed of late, making today’s RBA rate hike interesting.
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 - with moves of 25bps each meeting from October to February.
On the other hand, FXStreet’s Valeria Bednarik says,
If Australian policymakers maintain the aggressive pace of hikes, it may be found to be the cause of a recession.
How could the RBA decision affect AUD/USD?
AUD/USD grinds higher around the intraday top, positing the biggest daily gains in over a week, as risk-on mood joins a pullback in the US Dollar Index (DXY). Among the main catalysts, hopes of more stimulus and receding hawkish bias, as well as preparations for the 0.50% RBA rate hike, also seem to have underpinned the Aussie pair’s latest recovery. Even so, the pair bulls remain cautious amid mixed signals from home and abroad.
As per the latest Aussie data, inflation jumped to the highest in three decades while the Unemployment Rate dropped to the lowest in 50 years. The problem, however, is with the housing market as Home Loans plunged by 8.5% in July, the second-largest fall in two decades. It should also be noted that the Participation Rate and net employment also cooled down recently, which in turn underpin the recession fears should the rate hike continues.
Also challenging the RBA hawks are the economic fears emanating from its largest consumer China, as well as from Europe, which in turn warrants caution on the part of the policymakers.
That said, a 0.5% rate hike appears already priced in and may offer a knee-jerk reaction, which in turn highlights the pace of bond purchase as the key catalyst. Should the policymakers appear cautious and ease on bond purchases, the bears may concentrate more on the US dollar strength and rush towards the yearly low. On the contrary, an intact bond purchase and hawkish rate statement could tease the AUD/USD bulls.
Technically, a four-month-old descending trend channel signals the AUD/USD pair’s bearish bias. However, the RSI (14) approaches oversold territory and hence could challenge the further downside. Even so, the yearly low near 0.6680 and the channel’s support line around 0.6570 seem to lure the sellers. Alternatively, the 50-DMA hurdle surrounding 0.6900 appears an immediate key hurdle for the pair buyers to watch. Following that, the 38.2% Fibonacci retracement of the April-July downside and the stated channel’s resistance line, respectively near 0.7050 and 0.7100, could challenge the upside moves.
AUD/USD: Daily chart
Key quotes
AUD/USD justifies cautious optimism above 0.6800 as RBA rate hike, US ISM PMI loom
Reserve Bank of Australia Preview: Is the central bank ready to slow the tightening pace?
AUD/USD Forecast: Eyes on RBA monetary policy decision
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.