The Australian Dollar has been trading on a softer footing going into tomorrow’s RBA policy meeting after correcting lower throughout the second half of last month. Economists at MUFG Bank analyze how the monetary policy decision could impact the Aussie.

RBA to leave rates on hold

The Australian rate market is currently pricing in only 4 bps of hikes for tomorrow’s RBA policy meeting. We agree with current market pricing and expect the RBA to leave rates on hold tomorrow.

If the RBA leaves rates on hold as we expect, then market attention will quickly shift to future rate guidance from the RBA. The Australian market is pricing in around 40 bps of hikes by the end of this year with the next hike expected in either August or September. 

Current pricing highlights that a hawkish hold is expected, and anything less would weigh on the Australian Dollar