The Reserve Bank of Australia (RBA) is widely expected to maintain the cash rate and 3-year bond yield target at 0.10%.
The Australian and New Zealand Dollars are trading slightly lower ahead of the release of the Reserve Bank of Australia’s (RBA) interest rate decision at 04:30 GMT. The currencies rose the previous session as the U.S. Dollar weakened after investors said it had lost its safe-haven appeal.
At 03:38 GMT, the AUD/USD is trading .7634, down 0.0018 or -0.24% and the NZD/USD is at .7045, down 0.0017 or -0.24%.
The U.S. services purchasing managers’ index from the Institute for Supply Management showed faster than expected expansion in March, and the reading of 63.7 was the highest on record. This was on top of Friday’s U.S. Non-Farm Payrolls report that showed 916,000 added jobs. This was more than analysts expected and marked the fastest growth since August 2020. The unemployment rate declined to 6%.
That good news should’ve driven U.S. Treasury yields higher, but instead the U.S. 10-year Treasury yield drifted lower. This move helped dampen demand for the U.S. Dollar. The price action suggests the bullish outlook had been priced into the greenback, at least over the short-run.
Australian job advertisements surged to their highest in 12 years in March, a promising sign the labor market’s blistering recovery can withstand the removal of some of the government’s emergency support programs.
Tuesday’s figures from Australia and New Zealand Banking Group showed total job ads grew 7.4% in March from February, when they jumped an upwardly revised 8.8%.
At 190,542, ads were at their highest level since November 2008 and up a massive 39.7% on a year earlier when a pandemic lockdown began to shutter many industries.
ANZ senior economist, Catherine Birch said the strength of ads suggested the ending of the government’s JobKeeper support program would have a smaller impact than first feared.
The Reserve Bank of Australia (RBA) is widely expected to maintain the cash rate and 3-year bond yield target at 0.10%. While the RBA may tweak the accompanying statement to recognize recent developments, the tone will likely remain unambiguously dovish, according to Reuters.
Governor Philip Lowe and the RBA board would be satisfied that current policy is working well and won’t risk making material changes to their message.
The RBA statement will likely remain cautious due to the Australian government’s decision to reduce fiscal support by allowing the Jobkeeper program to expire and the uncertainty surrounding delays to the COVID-19 vaccine rollout, according to Reuters.
The bank will probably push back against market expectations of rate hikes as soon as late 2022 by repeating their March statement conclusion: “The Board does not expect these conditions to be met until 2024 at the earliest,” Reuters concluded.
We expect the AUD/USD to have a muted reaction to the RBA announcement with most investors focusing on the U.S. economy. However, if the financial futures markets start to price in an earlier than expected rate hike by the central bank then look for downside pressure on the Aussie.
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James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.