When is the RBA Interest Rate Decision and how could it affect AUD/USD?

AUD/USD is up for the key moves as not only the Reserve Bank of Australia’s (RBA) but the Aussie budget is also ready for publishing, respectively around 03:30 GMT and 08:30 GMT, on Tuesday.

While the latest risk-on moves, mainly backed by US President Donald Trump’s health recovery, join the receding coronavirus (COVID-19) resurgence risk at home, AUD/USD traders keenly await the details of the RBA Rate Statement for fresh impetus.

Market forecast suggests no change in the benchmark interest rate, currently around 0.25%, but a dovish tone in the rate statement is widely anticipated considering the latest comments from RBA Deputy Governor Guy Debelle. Although the RBA policymaker said that the worst is behind is us, his worries concerning the mismatch between the inflation and employment outlook can be spotted in the updates.

Further, the Aussie government is also to publish budget details and is largely expected to announce a take cut after already unveiling multi-billion Aussie dollars worth of infrastructure spending plan. Considering the current economic scenario of Australia, Westpac said, “The deficit has ballooned to a forecast -$240bn (12.5% of GDP) for 2020/21, from -$85.3bn for 2019/20 and a near-balanced budget in 2018/19. The reason of course is the COVID-19 pandemic, the ensuing severe recession and the necessary policy response. The deficit is then expected to narrow to -$115bn in 2021/22 as the economy reopens and activity rebounds. Policy measures add an expected $179bn to the budget in 2020/21 and $73bn in 2021/22. This includes an expected October budget package of $45bn for this year and $66bn for 2021/22. The key budget strategy is to lift the economy to a higher growth path, enabling progress to be made in reducing the unemployment rate.”

On the other hand, TD Securities follow market consensus for the RBA while saying,

We expect the RBA to keep the target cash rate on hold at 0.25% at this meeting but for the Bank to highlight that it continues to assess the merits of further monetary measures to support the Australian economy. The reason the RBA is likely to keep policy unchanged at this meeting is to assess the Federal and state budgets over the coming month before potentially announcing further easing at the November meeting.

How could it affect AUD/USD?

Following the downbeat Aussie trade numbers, coupled with the recent risk reset, AUD/USD seesaws around 0.7185 during the initial hours of Tokyo open. The bulls have been struggling to clear 0.7200 off-late and can witness an extra downside pressure if the RBA disappoints the markets.

Considering this, FXStreet’s Valeria Bednarik says, “Hints on future action in the near term may hit the Aussie, although it seems unlikely that any central bank will be able to overshadow sentiment-related trading. An optimistic RBA seems unlikely, but if it happens, and the greenback remains under pressure, the AUD/USD pair may get a boost and near the mentioned yearly high.”

Technically, another miss to cross the 21-day and 50-day SMA confluence, currently around 0.7200-10, on the daily closing keep the AUD/USD bears hopeful. Though, 10-day SMA around 0.7120, followed by the 0.7100 round-figure, offers near-term strong support.

Key notes

Reserve Bank of Australia Preview: Paving the way for more stimulus

AUD/USD: Wavers below 0.7200 ahead of RBA, Aussie budget

About RBA Monetary Policy Statement

The RBA Monetary Policy Statement released by the Reserve bank of Australia reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. It is considered as a clear guide to the future RBA interest rate policy. Any changes in this report affect the AUD volatility. If the RBA statement shows a hawkish outlook, that is seen as positive (or bullish) for the AUD, while a dovish outlook is seen as negative (or bearish).