RBA Caught Between Strong AUD and Housing Bubble

The Reserve Bank of Australia (RBA) will announce its interest rate decision on May 5 at 12:30 am EDT. The RBA has faced a constant battle to depreciate the AUD in order to remain competitive in global exports. Interest rate cuts and verbal intervention have been used pro actively by central bank Governor Glenn Stevens to keep the Aussie from rising higher as the interest rate is Australia is still an attractive 2.25 percent. The central bank held rates on the last meeting prompting economist to increase the probability of a rate cut in the meeting this month. The market is divided in its expectations from what once was an almost unanimous forecast of a rate cut in May.



The AUD/USD has been boosted by the rise in prices of iron ore and a struggling USD. The rate differential has given the Australian currency more demand along with the rise of commodities. The USD has regained some of the ground lost as the U.S. economy got a somewhat confident endorsement from the Federal Reserve. Central banks continue to drive the FX market and the RBA will be in focus as it announces its rate decision next week to be followed by employment and economic forecast data. This will be an interesting week for Aussie traders as data dependancy is on the rise.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza