Looking for the next big event to trade? The upcoming RBA monetary policy statement could be your best bet since some changes are expected!
Why is this event important?
Central banks pretty much have a huge influence on forex price action since monetary policy changes affect the perceived value of currency.Policymakers look at economic factors like inflation, growth, employment, and spending among many others in order to determine if adjustments to asset purchases or interest rates are needed.
Major threats to growth and price stability could spur rate cut expectations, which are usually bearish for a currency. On the other hand, strengthening economic performance could prompt rate hike speculations and currency appreciation.
What happened last time?
The February RBA statement turned out to be an upbeat one as Governor Lowe highlighted the strength of the domestic economy and downplayed the risks from bushfires and the coronavirus outbreak.
As a result, the Aussie popped higher across the board during the announcement. It was even able to extend its gains against the yen, franc, and euro over the next trading sessions.
What’s expected this time?
No actual adjustments to interest rates are expected in the upcoming rate statement, but it’s important to note that a lot has changed in the coronavirus situation.With that, several analysts expect the RBA to be less chipper this time around, likely acknowledging that the outbreak could have more repercussions on the Australian economy than previously thought.
Keep in mind that China is Australia’s top trade buddy, so the damage to the former’s business activity and overall economic performance could hit the latter’s commodity export sector quite hard.If the RBA decides to shift to a more somber stance, the Aussie could return its recent gains as traders bring back easing expectations for later in the year. On the other hand, staying upbeat could mean more gains for the currency, especially if risk appetite is currently in play.
Planning on trading this top-tier event? Just make sure you keep tabs on AUD pairs’ volatility and practice proper risk management!