RBA Preview: Reluctant to react to aussie strength

The Reserve Bank of Australia (RBA) is set to meet this Tuesday at 04:30 GMT. The central bank is expected to stay on hold but less optimistic about the immediate economic outlook and that of H1 2021. Markets will watch out closely to see if the RBA changes its relaxed tune over the strength of the aussie, which would weigh on the AUD/USD pair, FXStreet’s Ross Burland briefs.

Key quotes

“The RBA is set to keep monetary policy unchanged despite a resurgence of the virus and how high the aussie has travelled since their last meeting.” 

“The meeting will follow a dovish dose of reality from the Federal reserve outcome last week, so it should be expected to follow suit and, in all probability, weigh on the prospects for a strong Aussie for the foreseeable future.”

“It should be noted that quite a bit has gone on since the RBA was last vocal bout its forecasts for the near and medium-term future, and there is enough to suggest that it will be a little less positive about the now and in 2021 than it was before. Crucially, the market will be looking for their outlook with regards to unemployment because as a consequence to the recent spike in the virus in the ‘big smoke’, the RBA will probably admit to the reality that it will take quite a bit longer to drop below 7%.”

“The most straightforward move from the RBA could be simply to reiterate the current accommodative stance and the determination to do more if needed. Any further tapering comments could well underpin the currency, but they will be less effective in calming the market’s caution over the virus situation in Victoria.”

“The week in Australia is also packed with other releases, with trade and retail sales data from June, and with the RBA Statement of Monetary Policy later in the week, it could be a choppy time ahead of the currency. AUD may only marginally benefit from any data surprise.”