When is the RBA interest rate decision and how might it affect AUD/USD?

RBA interest rate decision overview

The RBA is due to meet today at 0430 GMT where they are fully expected to remain on hold at historically low rates of 1.5%. Due to the ongoing concerns about the Australian economy, the RBA has signalled since August 2016, the last time they cut rates, that they are on hold. However, there has been a slight shift of dovish epectations in the market recently.

Analysts at ANZ have pointed out today, there has also been plenty for the RBA to ponder of late, which sets up for an interesting statement. "Q1 GDP growth looks weak and house price inflation has slowed. Conversely, business sentiment is solid and the labour market has improved. Considering the AUD has been somewhat unloved of late (notwithstanding overnight strength) and the market is actually testing the idea of rate cuts again, whether the RBA chooses to maintain a middling message or instead acknowledge the recent less positive developments could determine whether recent market moves have any legs."

How could affect AUD/USD?

With the market fully pricing in a no change and a non-event from the RBA, any surprises, either way, could move the market significantly. The largest ranges in the Aussie seen over the RBA as an event was over 175 pips on a 4hr chart basis back in 2015. 

In today's event, again, the statement could be a catalyst for the Aussie depending on the rhetoric. Things to look out for include the language around the Aussie, USD, commodities, housing, developments in sluggish global inflation and the job market in particular; any significant variations to the previous language around those subjects could be a catalyst - again, markets might be more toleratant of a dovish surprise than anything else. 

AUD/USD has been better bid since the start of this month. AUD rallied from  the late 0.73 levels  to reach a high of a few pips below the psychological 0.75 handle. An upside surprise from the meeting could eye a break through 0.7508 and the daily 200 ema for a test of April 22nd's high of 0.7583 as the Bull's ultimate objective. To the downside on any ultra-dovish rhetoric and/or jawboning of the currency could ultimately pressure 0.7420 and early June 3rd lows.

Key-notes:

• RBA: Expect a reasonably positive tone – RBC 
• RBA: On hold, despite cyclone-related growth wobbles - HSBC 
• AUD: Cautious outlook? - Rabobank

About the RBA Interest Rate Decision

RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.