After surprising the markets with a 0.25% rate hike in the last monetary policy meeting, the Reserve Bank of Australia (RBA) is up for another 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 Aussie central bank’s peak rate, despite major consensus favoring a no rate change announcement from the RBA. That said, the RBA’s benchmark rate is around 3.85% at the latest.
Given the recently mixed statements in the RBA minutes, as well as mostly upbeat 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. The same makes today’s RBA crucial for the AUD/USD pair traders to watch for clear directions.
Ahead of the event, Analysts at ANZ said,
Last week we revised up our terminal rate call in Australia 4.35%, as we no longer see 4.10% as sufficient to bring inflation back to the target quick enough. Nonetheless, we see it as a line ball call whether the RBA hikes at today’s meeting or waits until July, though favor a hike today at the margin.
On the same line, FXStreet’s Matias Salord said,
Whatever decision the RBA takes, it is likely to keep the doors open to another rate hike. If it decides to pause, this would be considered a "hawkish hold". If the RBA increases the cash rate, it is unlikely to be a "dovish hike". While the AUD/USD could benefit from a rate hike, it is not necessarily a sustainable move. The upcoming Australian Q1 GDP report, due on Wednesday, will be an important factor to watch.
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