Alike every first Tuesday of the month, the Reserve Bank of Australia (RBA) is up for conveying the latest monetary policy meeting and Interest Rate Decision around 04:30 AM GMT.
Market consensus favors no changes in the benchmark interest rate of 0.10%, neither altering the 3-year yield targets, during today’s RBA decision. However, the Aussie central bank cheered economic recovery during its July meeting and backed September tapering of the weekly bond purchases, from A$ 5 billion per week to A$ 4 billion. Following that, the Delta covid variant probed the Oz nation’s economics and hence the RBA may have to rethink over dialing back the easy-money policies.
It should be noted, though, that the Australian central bank isn’t famous for its dovish tilt and the market sentiment cheers stimulus hopes of late, which in turn makes today’s meeting the key for the AUD/USD traders.
Australia and New Zealand Banking Group (ANZ) follows market sentiment while saying,
At today’s RBA announcement we think the Bank will signal a delay to its intended September tapering of bond purchases given downside risks to the economy are greater than when it decided on the taper in early July. The RBA will also publish its August Statement on Monetary Policy on Friday. While the data to date have generally beaten expectations, the extended lockdown in Sydney is likely to see near-term GDP growth forecasts shaved. For the labor market, wages and inflation, however, we expect an upgrade to the forecasts.
On the same line, FXStreet’s Valeria Bednarik said,
Overall, market players are anticipating a dovish stance that should put the AUD under selling pressure. The AUD/USD pair is depressed, trading below the 0.7400 level. In July, the pair set a yearly low at 0.7288.
How could the RBA decision affect AUD/USD?
AUD/USD remains sidelined around 0.7360, struggling to extend the previous day’s corrective pullback, as traders remain divided over the RBA statement considering the latest Delta covid strain woes in the Pacific major. It’s worth mentioning that the International Monetary Fund’s (IMF) historical allocation of $650 billion to its Special Drawing Rights (SDRs) and progress over the US infrastructures spending talks tests the pair sellers of late.
That said, the widely anticipated dovish tilt of the RBA may recall the AUD/USD bears, at least for intraday, while likely reversing the previous day’s recovery moves. However, the move seems mostly priced in and hence a positive surprise should offer a notable push to the pair prices towards the north. Hence, traders need to remain cautious as the quote seesaws in the vicinity of the yearly low.
Technically, AUD/USD remains short-term bearish below 0.7410-15 including early July lows and last week’s swing high while a trend change can only be expected on a daily closing beyond 200-DMA near 0.7600. Even so, 0.7340 support confluence, comprising weekly rising trend line and highs marked during September–November 2020 probe intraday sellers ahead of directing them to the yearly low of 0.7288.
Key quotes
Reserve Bank of Australia Preview: Dovish twist as lockdowns continue
AUD/USD: Bulls and bears jostle around mid 0.7300s ahead of RBA
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.