The Reserve Bank of Australia (RBA) is leading April’s round of monetary policy decisions!
What are traders expecting and how can you trade the event?
Here are points you need to know if you’re trading RBA’s decision on April 5, 4:30 am GMT:
What happened last month?
RBA keeps rates unchanged at 0.1% as expected
Ukraine is a new source of uncertainty
Inflation to hit 3.5% before dropping to 2.75% over 2023
RBA won’t raise cash rate until “actual” inflation is consistently within the 2% – 3% range
As expected, RBA kept its interest rates unchanged in March. Predictably, the central bank also cited Ukraine as a new major source of uncertainty on top of rising energy prices and global supply chain issues.
What traders didn’t expect was for Governor Lowe and his team to stick to their guns and share that RBA won’t raise its interest rates until “actual” inflation remains consistent within the 2% – 3% range.
The lack of hawkish signals dragged AUD to new intraday lows across the board during the release.
Luckily for AUD bulls, higher commodity prices and a lack of escalation around the Russia-Ukraine tensions brought on a risk-taking mood that lifted AUD before the start of London session trading.
What are markets expecting this time?
No interest rate changes in April
No presser from Governor Lowe
Official statement to hint at a June rate hike?
Traders don’t expect RBA members to make any monetary policy changes in April, but many expect a hawkish tilt in the official statement.
For one thing, global prices have extended their uptrend since the members’ last meeting. Consumer spending has also remained strong as the labor market approaches full employment and job vacancies hit record levels.
Meanwhile, Australia’s 2022-2023 budget report released last week revealed a tax break for 10 million low and middle-income earners starting July.
The move is expected to raise consumer confidence but also up the pressure on the RBA to contain the increase in consumer prices.
Planning on trading the event? Make sure to note the average volatility of AUD pairs before you set your entry and exit targets.
It also helps to know AUD’s performance and trends against its major counterparts to pick the best AUD pair to trade.
Of course, if you’re not feeling like trading a top-tier report, you can always stay on the sidelines and note AUD’s price action for your future trades.
