The Reserve Bank ofAustralia (RBA) will exhaust traditional monetary policy easing options this week by delivering a 50 basis point rate cut as disruptions due to coronavirus outbreak are already having a more severe impact on Australia’s economy than previously expected and the negative impact is likely to intensify over the coming weeks, according to Bloomberg’s economist James McIntyre.
Most investment banks expect the RBA to cut rates by 25 basis points to a new record low of 0.5% on Tuesday. Money markets are also priced for a 25 basis point cut in the borrowing costs.
So, a 50 basis point rate cut could weigh over the Aussie dollar, sending AUD/USD pair fresh 11-year low below 0.6434 (Feb.28 low).
The Aussie dollar will likely surge if the central bank surprises markets by keeping interest rates on hold at 0.75%.
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