Trading the News: Reserve Bank of Australia (RBA) Interest Rate Decision
The Reserve Bank of Australia (RBA) rate decision may generate another limited reaction as the central bank is widely expected to keep the official cash rate at the record-low, but a material change in the forward-guidance may fuel the recent advance in AUD/USD[1] if the central bank shows a greater willingness to normalize monetary policy.
Like the Bank of Canada (BoC)[2], the RBA may start to change its tune as ‘members agreed that it was more likely that the next move in the cash rate would be up, rather than down.’ Even though Governor Philip Lowe and Co. remain in no rush to implement higher borrowing-costs, the central bank may come under increased pressures to abandon its accommodative stance especially as the Organisation for Economic Co-operation and Development (OECD) anticipates the RBA ‘to start gradually tightening towards the end of 2018, when the pick-up in wages and prices gathers pace.’
In turn, a batch of hawkish rhetoric may generate a bullish reaction in AUD/USD, but more of the same from Governor Lowe & Co. may undermine the recent advance in the Australian dollar[3] as market participants scale back bets for an RBA rate-hike in 2018. Sign up and join DailyFX Currency Analyst David Song LIVE[4] for a broader discussion on current themes and potential trade setups!
Impact that the RBA rate decision had on AUD/USD during the previous meeting
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