When is the RBA Interest Rate Decision and how could it affect AUD/USD?

The Reserve Bank of Australia (RBA) is set to announce the fifth straight rate hike this Tuesday at 04:30 GMT.  The central bank is widely expected to raise the Official Cash Rate (OCR) by 50 bps from 2.35% to 2.85%.

According to the latest Reuters poll, over a 70% majority of economists, 21 of 29, predicted the RBA would hike its cash rate by half a point to 2.85% at its October 4 meeting. Although the median forecast showed rates going up another 50 basis points next quarter to peak at 3.35%.

RBA Governor Philip Lowe already tempered expectations of aggressive rate hikes last month, as he said that they had almost neared the 2.50% neutral rate. Since then, fears over hard-landing and softer Australian monthly inflation have revived the bets for a dovish rate hike.

Therefore, a 25 bps rate hike decision by the RBA may not come as much of a surprise, as most major central banks are turning cautious amid growing recession fears and surging energy costs. Dwindling demand from China also remains a major concern for Australia. China is the island nation’s closest trading partner.

How could the RBA decision affect AUD/USD?

At the time of writing, AUD/USD is trading on the back foot around 0.6500, reversing Monday’s rebound to near 0.6520. Investors refrain from placing any directional bets on the aussie ahead of the critical RBA rate hike decision.

more to come ...