The Australian Dollar is the notable outperformer as the RBA prepares market participants for higher interest rates. While monetary policy was left unchanged with the cash rate target at 0.1%, as expected. The key shift stemmed from the change in forwarding guidance in which the RBA dropped the statement that they will remain “patient”.
That said, with the RBA stating that they will assess incoming data “over coming months”, this suggests that June is a live meeting as opposed to May. Additionally, with the RBA also waiting to see a pick up in wage growth to see evidence that inflation is sustainably within its target range, this further endorses the view that May is too soon for the RBA to act. Of note, the Australian wage price index for Q1 will not be released until two weeks after the May policy decision. Not to mention that there will also be an election campaign during May, which further reduces the likelihood that rate liftoff will take place next month. While many point out that much like other central banks, the RBA is independent, it is worth noting that in its 62-year history of independence, the RBA has only altered policy twice during an election campaign. As it stands, money markets are 58% priced in for a hike next month.
AUD/USD Long (Buy)
Enter at: 0.76290