- RBA is expected to keep rates unchanged for the 20th straight meeting.
- AUD is on the offensive, will likely retain the bid tone post-RBA unless the central bank surprises with a strong dovish talk.
The Reserve Bank of Australia (RBA) will announce its June interest rate decision at 04:30 GMT today. The central bank is widely expected to keep rates unchanged at a record low of 1.5 percent.
Note, the cash rate has remained at 1.5% for 19 consecutive meetings and the market does not expect a lift off before end 2019. For instance, a full 25 basis point rise is not priced in until November 2019.
So, the focus will be on the central bank’s view on the Australian economy – housing market, inflationary pressures and a tightening labor market.
Major banks do not expect a big change in the policy statement and expect softer comments from the RBA governor in their policy press release.
According to Westpac Analysts, “the case for patience has been reinforced by recent labor market updates, with unemployment stuck around 5.5%, and wages, which remain sluggish thereby constraining consumer spending.”
So, RBA is expected to retain its neutral stance, but that may not deter the bulls from pushing the AUD higher as the markets expect a blow out first quarter GDP figure (scheduled for release tomorrow).
The Australian currency picked up a bid on Monday after the Australian Bureau of Statistics reported upbeat first-quarter corporate profits, wages, and retail sales. Business inventories grew by 0.7%, and are seen adding around 0.2 percentage points to quarterly GDP.
As of writing, the AUD/USD pair is trading at 0.7644 – largely unchanged on the day. The currency pair breached the key descending trendline yesterday as expected, confirming a short-term bullish reversal.
That said, the bull breakout could turn into a bull trap if the RBA adopts a dovish stance.
About the RBA 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.
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