The Australian dollar hasn’t reacted to news of a lockdown in greater Sydney and renewed border closures as cases of the coronavirus Delta variant spread. But if the uncertainty caused by the latest developments impacts RBA expectations, the AUD/USD could be exposed to renewed weakness.
The Reserve Bank of Australia meets on July 6 and a growing number of analysts are predicting they will be forced to raise rates as early as Q4 2022, well before the bank’s 2024 timeline. There is also rising speculation the RBA may drop the reference from previous statements that conditions for a rate rise are “unlikely to be until 2024 at the earliest.” Such expectations may have to be scaled back due to the rise in coronavirus-related uncertainty, which the RBA has previously flagged as a continuing concern. The June meeting statement noted: “An important ongoing source of uncertainty is the possibility of significant outbreaks of the virus”. The RBA may use the lockdowns as cover to push back against the market’s more hawkish predictions. The bank’s insistence that the economy needs more stimulus hasn’t wavered and any tweak to their bond-buying program announced at the July meeting is unlikely to be delivered with a hawkish tone.
AUD/USD Long (Buy) ENTER AT: 0.76173 T.P: 0.76550 S.L: 0.75619
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