When is the RBA Interest Rate Decision and how could it affect AUD/USD?

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.

How could the RBA decision affect AUD/USD?

AUD/USD retreats from the highest levels in five weeks while refreshing the intraday low near 0.6770. In doing so, the Aussie pair portrays the pre-RBA anxiety among traders. Also challenging the risk-barometer pair are the fears of EU-Russia tussles and the US-China tension, not to forget the market’s consolidation of the week-start moves amid a light calendar ahead of the RBA Interest Rate Decision.

That said, the RBA is likely to trouble trades even if it manages to announce a 0.25% rate hike, which also is less expected, as the recently softer data and a shift in the RBA’s tone join macro inflation woes.

Should the RBA shows readiness to pause the rate hike trajectory from the next meeting, or surprises the markets by doing the same in today’s RBA Rate Statement, the AUD/USD may have a further downside to trace.

Technically, a convergence of the 200-day EMA and an upward-sloping resistance line from mid-March, around 0.6820 by the press time, appears a tough nut to crack for the AUD/USD buyers.

Key quotes

Reserve Bank of Australia Preview: To pause or not to pause

AUD/USD aptly portrays pre-RBA anxiety at five-week top below 0.6800

AUD/USD Price Analysis: Further upside hinges on 0.6820 breakout and RBA

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 of the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.