AUD/USD and NZD/USD Fundamental Daily Forecast – No Rate Change from RBA, Likely to Maintain Neutral Policy Outlook

The Australian Dollar is trading flat shortly before the release of the Reserve Bank of Australia’s interest rate decision and rate statement. The RBA is once again expected to hold the cash rate at 1.5 percent. Traders are also looking for the central bank to remain upbeat, but maintain its neutral policy outlook.

At 0309 GMT, the AUD/USD is trading .7208, down 0.0001 or -0.01%.

Although today’s reports are important, their release comes at a time when most investors are focusing on Tuesday’s U.S. Mid-Term elections. By Friday, investors will shift their focus on the Statement of Monetary Policy. NAB is expecting some minor tweaks to RBA forecasts.

“The RBA’s employment rate forecast is of particular interest, given the recent fall to 5%,” NAB said in a Monday comment. “Note, on a quarterly basis, unemployment was 5.2% in Q3 – this will be the Bank’s starting point for its forecasts, not 5%. We therefore expect to see an unemployment rate estimate of 5-1/4% for December 2018, and bring forward when the unemployment rate hits 5% to late 2019. We’ll be interested to see whether the Bank forecasts a fall in the employment rate to or below the NAIRU, which it estimates to be around 5%.

“In contrast, only minor near-term changes to GDP forecasts are expected, while the inflation track is likely to be unchanged – given recent data has been bang-on the RBA’s forecasts.”

We’re expecting a limited reaction to the RBA statement today unless there is a surprise in the central bank’s dialogue. Of particular interest will be the RBA’s inflation and growth expectations. We may even see some commentary on possibly tightening lending requirement which seem to be a concern for some policymakers.

The key area on the daily chart to watch is .7202. Trader reaction to this level will tell us if the report was perceived as hawkish or dovish. If hawkish, buyers may take a run at Friday’s high at .7259. If dovish, this look for sellers to try to take out .7182. This will signal a shift in momentum to the downside with .7167 the next likely target.