Australian Dollar Tumbles as Markets Price in RBA Rate Cut Next Week
According to a Bloomberg News poll of economists, the Reserve Bank of Australia is anticipated to leave their cash rate target unchanged for the second straight month at 3.25 percent at 00:30 ET on Tuesday, but the Australian dollar maybe only respond to a surprise rate cut or a biased monetary policy statement. After the central bank’s last meeting, RBA Governor Alan Bollard said, “Together with the substantial fiscal initiatives, the cumulative decline in interest rates will provide significant support to domestic demand over the period ahead,” suggesting that further reductions were unnecessary. Since then, though, data has shown that Q4 GDP unexpectedly fell negative by 0.5 percent, the first decline in eight years, and while Bloomberg News is calling for no change in rates, Credit Suisse overnight index swaps are pricing in an 81 percent chance of a 25 basis point reduction. As a result, there is a risk that such a “surprise” move will lead the Australian dollar sharply lower. It will also be important to look to Bollard’s statement, as signs that the RBA may consider cutting the cash rate target again would add even more bearish pressure to the Australian dollar, while indications of a broadly neutral bias (and no rate cut) could support the currency.
Check out the Daily Fundamentals in its entirety for a look at what happened throughout the FX markets today.
- Australian Dollar Rebounds Ahead of Key Reserve Bank of Australian (RBA) Rate Decision
- US Dollar Down Over 2% vs British Pound as Markets Price In Fed Rate Cut Next Week
- How Will the RBA Rate Decision Impact the Australian Dollar and Risk Appetite?
- Australian Data May Set the Stage for 25bp Rate Hike by the RBA On Monday