- The Australian Reserve Bank is prepared to cut the interest rate at 25 basic points to 3.85% in May.
- The comments of the Governor of the Australian Central Bank, Michele Bullock, and the updated projections will be key.
- RBA policy ads would increase volatility, shaking the Australian dollar.
The Australian Reserve Bank (RBA) is prepared to reduce the Official Cash rate (OCR) by 25 basic points (BPS) to 3.85% from 4.1% after completing its May monetary policy meeting on Tuesday. The decision will be announced at 04:30 GMT.
The updated economic projection will be published together with the policy statement, while the press conference of the Governor of the RBA, Michele Bullock, will continue at 05:30 GMT.
With the reduction of rates already discounted, the operators will closely examine the updated economic projections of the Central Bank and the comments of Governor Bullock for the next address on interest rates and the Australian dollar (Aud).
The approach is in the next RBA interest rates movement
The recent series of Australian economic data has counteracted market expectations about more interest rate cuts by the RBA this year.
The Australian economy added 89,000 new jobs in April, exceeding the estimates of a 20,000 addition by a wide margin, while the March reading was reviewed to show the addition of 36.4k jobs instead of the 32.2K previously reported. The unemployment rate remained unchanged in 4.1% in April.
Meanwhile, the consumer price index (CPI) of the first quarter of Australia rose 2.4% compared to the same period last year, exceeding market expectations of an increase of 2.2%, and without changes compared to the 2.4% increase in the previous quarter.
The average trimmed CPC, the inflation indicator most often by the RBA, rose 0.7% in intertrimestral terms (QOQ) and 2.9% in annual terms. The RBA has an objective inflation range of 2%-3%.
The salary price index advanced 3.4% annually in the first quarter, exceeding the previous estimate and reading of 3.2%. In quarterly terms, salaries increased 0.9%, exceeding 0.8%forecast.
The country’s labor market remains strong while underlying inflation remains high, which could lead to RBA to point out prudence in policy perspectives.
In addition, reviews to the perspectives of inflation and growth will also help evaluate the path of the RBA forward in interest rates.
Previous the RBA policy decision, TD Securities (TDS) analysts said: “Night Indexed Swaps markets (OIS) have also completely discounted a 25 BPS cut. The evaluation of the RBA on the risks around tariffs will be of interest. We see risks of small sales in GDP, but we doubt that the IPC changes materially.”
How will the decision of the Bank of the Australian Reserve to Aud/USD impact?
The governor of the RBA, Michele Bullock, is expected to notice the economic and inflationary perspectives, particularly in the light of US tariffs, therefore, he could reiterate: “We have to be careful not to advance in politics.” Bulock’s cautious comments could rekindle the impulse of aud/USD recovery.
If Bullock expresses concerns about economic perspectives while hinting more rates cuts, Aussie is likely to face intense sales pressure, resuming its decrease towards the level of 0.6300.
Dhwani Mehta, leading analyst of the Asian session at FXSTERET, highlights key technical indicators to operate the AUD/USD after the policy announcement.
“The AUD/USD remains confined in a range between the simple mobile average (SMA) and the 50 -day SMA for the confrontation of the RBA. The 14 -day relative force index (RSI) is maintained above the midline, currently about 53, keeping the bullish potential intact.”
“A moderate cut by the RBA could send to the AUD/USD down towards the 50 -day SMA of 0.6333, below which the 100 -day SMA could be tested at 0.6299. If the sale pressure intensifies, the psychological level of 0.6250 will be the line in the sand for buyers. On the contrary, buyers need acceptance above the 200 -day SMA in 0.6452 for Resume recovery towards the maximum of November 25, 0.6550, followed by the threshold of 0.6600, “adds Dhwani.
Australian dollar Price last 7 days
The lower table shows the percentage of change of the Australian dollar (AUD) compared to the main coins last 7 days. Australian dollar was the strongest currency against the New Zealand dollar.
| USD | EUR | GBP | JPY | CAD | Aud | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.19% | -0.57% | -0.97% | 0.35% | -0.38% | 0.33% | -0.16% | |
| EUR | 0.19% | -0.25% | -0.23% | 1.06% | 0.44% | 1.01% | 0.51% | |
| GBP | 0.57% | 0.25% | 0.19% | 1.28% | 0.70% | 1.19% | 0.76% | |
| JPY | 0.97% | 0.23% | -0.19% | 1.32% | -0.03% | 0.45% | 0.57% | |
| CAD | -0.35% | -1.06% | -1.28% | -1.32% | -0.46% | -0.02% | -0.51% | |
| Aud | 0.38% | -0.44% | -0.70% | 0.03% | 0.46% | 0.46% | 0.03% | |
| NZD | -0.33% | -1.01% | -1.19% | -0.45% | 0.02% | -0.46% | -0.53% | |
| CHF | 0.16% | -0.51% | -0.76% | -0.57% | 0.51% | -0.03% | 0.53% |
The heat map shows the percentage changes of the main currencies. The base currency is selected from the left column, while the contribution currency is selected in the upper row. For example, if you choose the Australian dollar of the left column and move along the horizontal line to the US dollar, the percentage change shown in the box will represent the Aud (base)/USD (quotation).
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
