When is the RBA Interest Rate Decision and how could it affect AUD/USD?

Alike every first Tuesday of the month, the Reserve Bank of Australia (RBA) is up for conveying the latest monetary policy meeting and Interest Rate Decision around 03:30 AM GMT.

The RBA is expected to keep the benchmark interest rate unchanged around 0.10%. However, recently positive employment and inflation figures from Australia raise expectations that the Aussie central bank should announce a formal end to the A$350 billion bond-buying program.

Markets also expect an upward revision to the inflation forecasts and hints for early rate hikes than the previously backed 2024.

Though, fears emanating from the South African covid variant warrant challenge RBA hawks as December Retail Sales dropped to the lowest prints since mid-2020, -4.4% MoM compared to 3.9% forecast and 7.3% prior.

Ahead of the event Westpac said,

We expect the RBA Board to announce the conclusion of the QE bond-buying program but the cash rate to remain at 0.1%. There will be a keen focus on any shift in rhetoric concerning the timing of the tightening cycle, which Westpac expects to begin in August 2022. The statement is likely to reference updated forecasts, with full details in Friday’s quarterly statement. We will also hear from Governor Lowe in a speech tomorrow.

On the other hand, FXStreet’s Valeria Bednarik says,

The central bank has anticipated that it would put an end to its A$350 billion bond-buying programs in this meeting while maintaining the view that rate hikes will remain low at least until 2024. However, market players are anticipating that policymakers will bring forward rate hikes’ guidance to early 2023.

How could the RBA decision affect AUD/USD?

AUD/USD grinds inside the 0.7060-70 daily trading range amid the pair traders’ cautious mood ahead of the key Reserve Bank of Australia (RBA) monetary policy meeting. Also challenging the AUD/USD pair moves are the steady US Treasury yields and downbeat stock futures. It’s worth noting that the Aussie pair cheered the US dollar’s biggest daily fall in a month the previous day as markets shifted attention off hawkish Fed.

That said, AUD/USD traders are likely to pay more attention to today’s RBA verdict than the previous cases amid increased bullish expectations and virus woes. This gives rise to hopes of a pullback should policymakers sound cautious.

Technically, a downward sloping resistance line from January 20, near 0.7085, guards the AUD/USD pair’s immediate recovery ahead of another resistance line from January 13, close to 0.7130.

Alternatively, the 0.7000 threshold will precede the year 2021 low and the recent bottom, respectively around 0.6995 and 0.6965, to challenge the AUD/USD sellers.

Key quotes

AUD/USD ignores downbeat Australia Retail Sales below 0.7100, RBA in focus

Reserve Bank of Australia Preview: A hawkish surprise from Lowe & Co?

About the RBA interest 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.