Date: 02 Jul 2018

The Reserve Bank of Australia convenes tomorrow with the market expecting the RBA to keep rates unchanged at 1.5 per cent for the twentieth month in succession. More important for the Australian dollar (AUDUSD, AUDJPY, AUDNZD) may likely be the RBA’s forward guidance. The Australian central bank might feel it has to make some reference to external factors given growing trade tensions around the world and some indications that economic growth in China, a key market for Australia, is moderating somewhat. Such an approach could prompt the currency market to see a rate hold as slightly more ‘dovish’ . Traders might recall that in May the RBA statement included the sentence that “In the current circumstances, members agreed that it was more likely that the next move in the cash rate would be up, rather than down” only to drop that notion in June. How, or indeed if, the RBA approaches that issue tomorrow might attract traders’ attention. The devil will be in the detail of the RBA statement but a ‘dovish’ hold is certainly a risk traders might wish to contemplate.

Written by Neal Kimberley, External Currency Analyst.