Countdown to RBA Decision: Will the Aussie Dollar Surge on a Rate Pause?

As we approach the last week of September, all eyes are on the Reserve Bank of Australia (RBA) as it prepares to announce its latest interest rate decision. The market consensus points to a steady hold at 4.35%, unchanged from the previous month. While inflation has been easing, particularly headline inflation, core inflation remains persistently high, which suggests the RBA may adopt a cautious stance and pause rates once again.

This move comes as Australia grapples with a delicate balancing act: inflation is moderating, but it's still far from the RBA’s target range. A pause would offer the central bank more time to assess the economic landscape before making any bold moves. With expectations of a potential rate cut looming in 2024, particularly a 25 basis point reduction by mid-year, the central bank is likely to tread carefully for now.

Meanwhile, the Australian dollar (AUD) shows promising strength this week, especially against the U.S. dollar (USD) and Swiss franc (CHF). As gold prices continue their upward trend, hitting record highs of $2,600 per ounce, the AUD stands to benefit. Historically, the AUD has moved in tandem with gold, and this week looks no different. Traders should keep a close watch on the currency, as we may see continued appreciation in the coming days.

On the global front, the U.S. economic calendar is packed with key data releases. Thursday will bring the much-anticipated GDP report, followed by the core PCE price index on Friday. Both events are likely to introduce some volatility into the USD, particularly with Fed Chair Jerome Powell scheduled to speak later in the week. Market participants will be listening closely to Powell’s remarks, especially in light of recent speculation about further rate hikes or cuts by the end of the year.

For now, the U.S. dollar remains in a holding pattern, but as we move toward the end of 2024, the possibility of additional 25 or 50 basis point rate adjustments is still in play. 

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.