RBA -All About Forward Guidance

AUD is in focus with the RBA interest rate decision due at  12:30 PM SGT

It’s highly unlikely the RBA will cut rates at this meeting  with the futures market, a gauge of  trader sentiment , only pricing in on two pips of easing.  However,  investors will be keenly interested in the post rate decision comment and the accompanying forward guidance statement. Given that house prices in Sydney and Melbourne are again rocketing higher, it’s possible, despite the likelihood of economic fallout from Brexit, the RBA will maintain a  neutral bias in its forward guidance.

Keep in mind, although the RBA was jawboning early June post-May rate cut ” rebound in property prices will be temporary”; Central Bank interest rate cuts directly influence buyer confidence and cause demand surges in property markets, there’s  no escaping that fact.

AS for the Brexit fallout, no need to sound alarm bells as it will likely take considerable time to determine if the recent market upheaval will augur a weaker global and or domestic economic climate.    Also, the next official CPI inflation data will be released on  27 July, so it is more likely the RBA will wait for this data point before passing on another domestic rate cut. So the RBA’s August Cash Rate decision will be a live event.

None the less,  AUDUSD has made very constructive gains following the weekend election results, which initially saw the Australian Dollar dip only to be aggressively bought on the back of rebounding  risk sentiment.

In reality, a hung parliament or minority government should not have any prolonged effect on the markets and history tells us that  election-related currency moves seldom if ever have any staying power

Stephen Innes

Stephen Innes

Senior Currency Trader and Analyst at OANDA
Stephen has over 25 years of experience in the financial markets and specializes in Asian currencies at OANDA. After having started his trading career with NatWest Bank, he is currently based in Singapore as a Senior Currency Trader and Analyst with OANDA, focusing on the movement of the Aussie Dollar and ASEAN Currencies. Stephen has an extensive trading experience in Interest Rate Futures, Money Markets and Precious Metals. Prior to joining OANDA, he worked with organizations like Cambridge Mercantile, Nat West, Garvin Guy Butler, Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes