AUDUSD PRICE OUTLOOK: AUSTRALIAN DOLLAR EYES OCTOBER RBA MEETING
- Australian Dollar[1] price action has remained subdued throughout most of 2019 with spot AUDUSD[2] trading slightly above multi-year lows
- The Reserve Bank of Australia (RBA) is expected to cut rates for a third time this year, but the central bank could shock markets with a hawkish hold
- Join DailyFX for free live webinar coverage of the October RBA interest rate decision [3]
The RBA will kick off the fourth quarter of the year with its October interest rate decision slated for Tuesday at 4:30 GMT and brings Australian Dollar currency pairs into focus. The previous RBA monetary policy statement noted that “it is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target.”
Subsequently, there was a sharp uptick in RBA rate cut expectations about two weeks ago in response to uninspiring Australian employment data, which detailed an uptick in the unemployment rate to 5.3% despite a rosier reading on the headline change in employment figure. Traders are currently pricing a 79.6% probability that the October RBA meeting reveals another 25-basis point cut to the central bank’s overnight cash rate (OCR) according to overnight swaps data pulled from Bloomberg.
RESERVE BANK OF AUSTRALIA (RBA) RATE CUT PROBABILITY (OCTOBER 2019)
This is up sizably from the 21.7% probability priced on September 13 and compares to the RBA Shadow Board’s 24% probability. As such, there’s serious potential that the upcoming RBA decision disappoints dovish expectations, which could lead to a steep jump in the Australian Dollar if the central bank continues to favor a firm monetary policy
