RBA Interest Rate Decision Preview: Central bank expected to stay on hold after softer inflation data

RBA Interest Rate Decision Preview: Central bank expected to stay on hold after softer inflation data
  • Tuesday, 05/09/2023 | 08:03 GMT+5.5
  • It is expected that the interest rate in Australia will hold steady at 4.10% for the month of September.
  • The Reserve Bank of Australia may choose to keep the possibility of additional interest rate hikes as an option.
  • RBA policy guidance set to ramp up volatility around the Australian Dollar.

The Reserve Bank of Australia (RBA) is expected to mirror the stance of the US Federal Reserve (Fed) by maintaining its current interest rates when it makes its announcement on Tuesday.

Despite causing surprises in four out of its last five policy announcements this year, the RBA is expected to keep things uneventful at Governor Philip Lowe’s final policy meeting.

Reserve Bank of Australia interest rate decision: All you need to know on Tuesday, September 5

  • AUD/USD finds itself at a five-day low below 0.6450, as the US Dollar holds onto its recent gains amid a cautious market sentiment.
  • US S&P 500 futures are showing minor losses, reflecting concerns over China’s property sector. Meanwhile, the 10-year US Treasury bond yield has climbed back to 4.20%, marking nearly a 1% increase for the day.
  • China is expected to take further policy actions, potentially relaxing restrictions on home purchases. Country Garden, a troubled Chinese property developer, secured creditor approval to extend payments for an onshore private bond on Monday.
  • In economic news, China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) rebounded to 51.0 in August, surprising the market after July’s contraction at 49.2. This data exceeded expectations, which were set at 49.3.
  • The latest US Nonfarm Payrolls data showed a gain of 187K jobs in August, surpassing the anticipated 170K. However, the previous month’s reading was revised down significantly to 157K. Additionally, the US Unemployment Rate unexpectedly ticked up to 3.8%, while the annual Average Hourly Earnings increased by 4.3% in August, slightly below the expected 4.4% rise.
  • Looking ahead, the market’s focus is on the upcoming RBA interest-rate decision, which is expected to provide direction for the AUD/USD pair in a relatively light data week. Outgoing RBA Governor Philip Lowe is scheduled to deliver a speech titled “Some Closing Remarks” at the Anika Foundation in Sydney on Friday.

RBA interest rates expectations: How will it impact AUD/USD?

The Reserve Bank of Australia is widely anticipated to keep the Official Cash Rate steady at 4.10% during its September monetary policy meeting, which is scheduled for Tuesday and will be disclosed at 04:30 GMT.

During a testimony before the Australian Parliament’s House of Representatives Standing Committee on Economics in early August, RBA Governor Phillip Lowe stated, “There is a possibility that additional tightening of monetary policy may be necessary to facilitate a timely return of inflation to its target, but this will be contingent upon the data.” He also added, “Rates are currently on the restrictive side, so we are carefully fine-tuning our policy calibration.

Australian Dollar price today

RBA Interest Rate Decision Preview: Central bank expected to stay on hold after softer inflation data

The following table displays the daily percentage fluctuations of the Australian Dollar (AUD) in relation to various major currencies today. The Australian Dollar exhibited its greatest strength when compared to the New Zealand Dollar.

The heat map illustrates the percentage shifts among major currencies in relation to one another. The base currency is selected from the left-hand column, while the quote currency is selected from the top row. To clarify, if you choose the Euro from the left column and trace across the corresponding row to the Japanese Yen, the percentage change indicated in the box will signify the exchange rate for EUR (base)/JPY (quote).

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