Reserve Bank of Australia (RBA) meeting preview

Source: Bloomberg

What is the market expecting from this RBA meeting?

Market participants are expecting very little from the RBA at this meeting. Interest rate makes are implying no meaningful chance at policy change, while after last month’s Statement on Monetary Policy (SOMP), there is very little likelihood that the central bank will change its economic forecasts. In fact, the RBA has stated as much that this meeting will largely pass without new information. In it’s recent commentary, the central bank has stated it will review its yield-curve-control policy and quantitative easing program at the July meeting, suggesting that the RBA’s views on policy settings and the economic backdrop will be broadly the same as what was delivered in May.

What are the key themes to watch at this RBA meeting?

Markets to dig around for new information ahead of July policy review

The cut-and-thrust for market participants at this RBA meeting will be trying to glean any skerrick of new information about the central bank’s intentions for its July meeting. The RBA has flagged that it will decide upon whether to extend its $A100bn quantitative easing program, along with whether it extends it three-year yield target from the April 2024 to the November 2024 government bond, at that meeting. It’s likely the RBA itself is still awaiting further data and more time to decide what it does with both policies before settling on a decision, meaning there may be little new information for traders at the meeting.

What will the RBA say about Wednesday’s GDP data?

Australia’s economic fundamentals will be in some focus at this RBA meeting, given that the quarterly GDP data for Australia will be released by the Australian Bureau of Statistics (ABS) the day after the meeting. Consensus estimate is for 0.2% year-over-year growth for the Australian economy. Although the RBA is all but certain not to adjust its economic guidance or forecasts at this meeting, the central bank may provide some clues as to what Wednesday’s official ABS figures will reveal, and drive some level of positioning in financial markets in the lead-up to the release.

Source: ASX

How could the RBA meeting impact the AUD/USD?

Given the low likelihood of a change in policy, guidance or tone from the RBA at this meeting, it’s probably that the meeting will be a low impact event for financial markets. As it currently stands, the AUD/USD remains in a broad patter of consolidation, with short-term momentum likely skewed to the downside, as can be revealed by a falling RSI on the weekly charts, and a fading uptrend in the 20-week moving average. Nevertheless, the AUD/USD remains in a broad uptrend, as market sentiment and the global economic outlook remains bullish overall. However, it would seem the pair maybe on the cusp of a period of weakness in the shorter-term.

Source: Trading View, IG

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