RBA overview
The Reserve Bank of Australia’s (RBA) meeting is scheduled to occur at 04:30 GMT.
The central bank is expected to cut the overnight cash rate (interest rate) to a new record low of 0.75% from the current 1%.
Markets priced for a rate cut
Having cut rates by 25 basis points in June and July, the RBA was expected to stand pat till November.
The dismal labor market data released in September, however, convinced markets that the central bank would deliver a rate cut in October.
As a result, the AUD/USD pair fell by more than 200 pips in the 12 days to Sept. 12. Put simply, the market is largely priced for a 25 basis point rate cut.
Also, according to interest rate futures, there is an 80% chance of the RBA cutting rates by 25 basis points.
Impact on the AUD
With rate cut priced in, there is room for a notable corrective rally in the Aussie dollar if the RBA downplays the need for unconventional monetary policies.
The AUD, however, will likely come under pressure if the RBA hints at another rate cut before the end of the year and indicates readiness to implement unconventional policies like bond purchases, if required.
It is worth noting that most investment banks expect the RBA to deliver the next rate cut in February.
- RBA Preview: rates to new record lows
About RBA
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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