Early Tuesday morning in Asia, at 01:30 GMT, the Reserve Bank of Australia (RBA) will release minutes of the latest monetary policy meeting held in May.
The RBA’s May month monetary policy meeting announced a 25 basis point (bps) lift in the official cash rate (OCR). The board also signaled further rate hikes and revised inflation forecasts drastically higher during the quarterly Monetary Policy Statement.
Given the indecision over the RBA’s next moves, mainly relating to the size of the rate increase considering China’s covid woes and the latest softer data from Australia, today’s RBA Meeting Minutes will be crucial to determine short-term AUD/USD moves.
Westpac is on the same line and said,
While we have already heard plenty from the RBA since the May meeting, including the lengthy quarterly statement, markets will look for any clues on the likely size of the next rate hike, having been completely wrongfooted in May.
How could the minutes affect AUD/USD?
AUD/USD extends the previous two-day rebound from the lowest levels since mid-2020 as the bulls attack 0.7000 by the press time. The Aussie pair’s latest upside could be linked to the hopes of an early end to the covid-linked lockdowns from Shanghai, as well as a softer US dollar backed by the downbeat US data and Fedspeak.
That said, the Aussie pair’s further upside hinges on how the RBA manages to keep the bulls happy even if they know that the 25 bps rate hike is given. In that case, a hint of more 50 bps moves in the future could play a nice role to lure the AUD/USD pair buyers.
Technically, lows marked during late 2021 and earlier in the month, respectively around 0.6995 and 0.7030, will challenge the additional upside of the AUD/USD prices.
Alternatively, a downward sloping trend line from August 2020, near 0.6820, challenges the pair’s downside moves.
Key Notes
AUD/USD struggles below 0.7000 ahead of RBA Meeting Minutes, US Retail Sales
AUD/USD Forecast: Challenge of 0.7000 on the table
About the RBA minutes
The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the RBA is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the AUD.