After announcing 10 consecutive rate hikes so far, hawks at the Reserve Bank of Australia (RBA) appear running out of steam. However, some on the floors do expect the Aussie central bank to mark the one last hawkish dance before pausing the rate hike trajectory. That said, the RBA is up for an Interest Rate decision around 04:30 AM GMT on Tuesday.
It’s worth noting the RBA is likely to throw dice on the dove’s side as traders remain divided over the 25 basis points (bps) of a rate hike to the 3.60% benchmark rate.
Given the recently mixed statements in the RBA minutes and a contrasting play between inflation and wage numbers, not to forget the talks of policy pivot, the AUD/USD traders will be more interested in hearing about the end of the rate hike trajectory, making this event crucial.
Ahead of the event, Analysts at ANZ said,
We expect a 25bp hike in the cash rate from the RBA today, but the decision will be finely balanced. Looking at the four data releases Governor Lowe highlighted as guiding the decision, we see ongoing resilience: unemployment fell back to 3.5%; NAB business conditions remain robust, price and cost growth remain elevated and firms are still in hiring mode; retail sales were softer at 0.2% m/m, but services spending remained solid; and finally, the monthly CPI showed inflation momentum is not slowing as much as the fall in annual inflation would suggest. All that said, the probability of a pause is the highest it’s been in some time.
On the same line, FXStreet’s Matias Salord said,
Considering the current environment, with doubts about the future of the economy, the impact of the RBA could be short-lived, particularly if it proceeds without major surprises. What could impact the most is how officials see the economy and their outlook. The AUD/USD should benefit from an upbeat perspective. On the contrary, a cautious central bank opting to stay on hold and pointing out that it could stay that way for a while should be (very) negative for the Aussie.
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