AUD/USD and NZD/USD Fundamental Daily Forecast – RBA Expected to Raise Benchmark 50-Basis-Points

The Australian Dollar is trading nearly flat shortly before the Reserve Bank of Australia’s (RBA) interest rate and monetary policy decisions at 04:30 GMT on Tuesday.

At 03:45 GMT, the AUD/USD is trading .6800, up 0.0002 or +0.03%. On Friday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $67.42, up $0.24 or +0.35%.

RBA to Hike by Another Half-Point, Slower Pace of Tightening Ahead:  Reuters Poll

The RBA will raise the cash rate by another half-point today to curb soaring inflation but will moderate the pace of hikes for the remainder of the year, a Reuters poll of economists found.

Twenty-seven of 29 economists in the Aug. 26 – Sept 1 Reuters poll forecast the RBA would hike the cash rate by 50 basis points at its Sept. 6 meeting, taking rates to 2.35%, more than three times higher than before the COVID-19 pandemic.

All four major local banks – ANZ, Westpac, CBA and NAB – were among those expecting a 50 basis point hike on Tuesday. The remaining two expected a 40 basis point move.

Economists are also expecting the RBA to opt for smaller moves as soon as next month as rates approach the neutral level that is neither stimulative nor restrictive, estimated by the RBA at 2.50%.

Most respondents who answered an additional question predicted the central bank would revert to 25 basis point increments at the October and November meetings.

Australia Current Account Surplus Balloons in Q2, Boosts Growth

Australia’s current account surplus widened sharply in the June quarter as resource exports were boosted by both prices and volumes, making a sizable contribution to economic growth, Reuters reported.

Data from the Australian Bureau of Statistics out on Tuesday showed the surplus ballooned to A$18.3 ($12.50 billion), from A$2.8 billion the previous quarter and just under forecasts of A$20.8 billion.

Exports of goods jumped almost 15% as miners shipped more resources to Asian customers amid surging prices, while imports tapered off after a very strong March quarter.

As a result, net exports will add 1.0 percentage points to gross domestic product (GDP), above forecasts for a 0.9 percentage point contribution.

Daily Forecast

We’re looking for a muted reaction to today’s RBA rate hike decision if the central bank raises its benchmark 50 basis points as expected and announces the pace of future rate hikes may slow.

Furthermore, the focus will quickly shift to Wednesday’s quarterly GDP report, which is expected to come in at 1.0%. This report is more likely to have a bigger influence on the AUD/USD then the RBA decisions.