RBA Preview: Preparing markets to cut rates and curb aussie's appreciation

The Reserve Bank of Australia has a monetary policy this Tuesday at 03:30 GMT, and while the central bank is expected to remain on hold, speculative interest is anticipating a dovish stance, paving the way for more easing coming in the near-term. The AUD/USD pair is trading on sentiment, which means that RBA’s announcement could have a limited impact, FXStreet’s Chief Analyst Valeria Bednarik reports.

See – Reserve Bank of Australia Preview: Seven major banks expectations

Key quotes

“The cash rate in Australia stands at a record low of 0.25% since March when the RBA also announced it was implementing yield curve control.  Policymakers announced a target for the yield on 3-year Australian Government bonds of around 0.25%.”

“Speculation mounts that policymakers are preparing some new stimulus measures that may include cutting the cash rate further and expand asset purchases on longer-term bonds to lower the long-term yields and curb the appreciation of the Aussie.”

“Ahead of the event, the market is in an upbeat mood, hoping the US Congress will be able to clinch a deal and that US President Trump will recover from COVID-19. The optimism underpins AUD/USD which may suffer a sharp setback, should policymakers decide to act as soon as this October. Chances of this happening, however, are quite a few.”

“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.”