The Reserve Bank of Australia is expected to hold the benchmark interest rate steady at the 49-year low of 3.00% as the board adopts a wait-and-see approach, and long-term expectations for higher interest rates could boost demands for the Australian dollar as market sentiment improves.
Trading the News: RBA Rate Decision
What’s Expected
Time of release: 05/05/2009 04:30 GMT, 00:30 EST
Primary Pair Impact : AUDUSD
Expected: 3.00%
Previous: 3.00%
Impact the RBA Rate Decision had on AUDUSD over the last 2 months
Apr 2009 RBA Rate Decision
| The Reserve Bank of Australia lowered the benchmark interest rate by 25bp to a 49-year low of 3.00% as the region faces its first recession since 1991, and went onto say that the extraordinary efforts taken on by policymakers will help to ‘provide significant support to domestic demand.’ Governor Glenn Stevens said that the $1T economy will contract this year, and stated that there was only room for a ‘modest adjustment’ in April after the growth rate unexpectedly fell 0.5% in the fourth quarter, which is the first contraction since 2000. Moreover, the central bank noted that demands for employment is ‘weakening,’ while ‘demand for credit is weak overall,’ and said that policymakers expect GDP ‘to fall in 2009’ as the downturn in the global economy intensifies. The comments suggests that the RBA may continue to ease policy further as growth prospects deteriorate, and may step up their efforts as trade conditions falter. | |
March 2009 RBA Rate Decision
| The Australian central bank held the cash rate steady at the 45-year low of 3.25% amid expectations for a 25bp cut, which suggests that the RBA may keep rates on hold after taking unprecedented steps to stimulate the $1T economy. RBA Governor Stevens said that the extraordinary measures taken on by the government and the central bank will provide ‘significant support’ to the economy, but went onto say that ‘weak conditions are likely to continue in the near term’ as nation teeters on the brink of a recession. Despite the encouraging comments from the central head, the outlook for growth and inflation remains bleak as the downturn in the global economy intensifies, and conditions are likely to get worse as trade conditions falter. Nevertheless, as policymakers adopt a wait-and-see approach, weakening fundamentals could spark another round of easing as growth prospects deteriorate at a rapid pace. | |
What To Look For Before The Release
Traders with access to market depth information via the FXCM Active Trader Platform may use it to gauge the potency of the economic data release as well as to shed some light on the market’s directional bias. Increasing volume ahead of the announcement will telegraph likely follow-through behind whatever move is to materialize, while an imbalance in available liquidity on the Bid versus the Offer side of the market will tell us the direction major institutions are likely favoring ahead of the announcement:
| Bullish Scenario:
If we see substantially deeper available liquidity on the Bid side of the market, this tells us that major price providers in the market are looking to buy the AUD against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bullish bias on AUDUSD ahead of the data release. | Bearish Scenario: |
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