Australian Dollar May Show a Limited Reaction to RBA Rate Decision Overnight
The Reserve Bank of Australia (RBA) is anticipated to leave their cash rate target unchanged at 00:30 ET for the fifth straight month at 3.00 percent, and the Australian dollar may only respond to a biased monetary policy statement. As it stands, Credit Suisse Overnight Index Swaps (OIS) are pricing in 191 basis points worth of rate increases by the RBA over the next 12 months, compared to 112 basis points a month ago, as economic data has shown slight improvements and the central bank has taken a more hawkish stance. Indeed, the RBA’s last policy statement dropped a line that said that "the outlook for inflation allows some scope for further easing of monetary policy," suggesting that they have no intention of cutting rates any further. If the RBA doesn’t bother to really change the statement, there may not be much of a market reaction, but if there are signs that the central bank is feeling more optimistic on the growth outlook, the Australian dollar could rally.
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