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

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.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes