May 07, 2024

Today’s Reserve Bank of Australia rate announcement has taken on a much bigger focus for a lot of the market after recent inflation and jobs data has pointed to a resilient economy. Markets do not have a full rate cut priced in for 2024 and the RBA is firmly expected to keep rates at 12-year highs again today.

Recent CPI data printed higher than expected with both the headline and trimmed mean quarterly numbers beating expectations with a 1% increase against the expected 0.8% rise, and the year-on-year number also pushed higher coming in at the 3.5% mark. These figures have thrown the cat amongst the pigeons to a certain extent and now have some economists calling for rate hikes rather than the previously anticipated cuts.

Market expectation is that the RBA will keep rates on hold at 4.35% today but traders are now expecting volatility around the event with the focus on any change in the statement and on what Governor Michele Bullock has to say in the press conference. The risk of a more hawkish stance given the recent data updates is strong and traders see more topside potential for the currency, especially if the bank reinstates a tightening bias.

Aussie-Hourly

AUDUSD Hourly chart

The Aussie dollar strengthened over the last few weeks after hitting a 2024 low in mid-April, with most of the move attributed to a weaker greenback. It is now sitting near multi-week highs near 0.6670 and a move to a more hawkish outlook should see longer-term trendline resistance near 67 cents come into focus, with a move to a tightening bias likely to see much stronger moves north. If the bank maintains its neutral bias, then expect the pair to shift lower into recent ranges with anything considered to be more dovish likely to lead to a move towards the 200-day moving average, currently around 0.6550.

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