The Reserve Bank of Australia is scheduled to announce its next monetary policy decision tomorrow at 5:30 pm BST. Market expects that RBA will keep rates unchanged for the third consecutive meeting, with the main rate staying unchanged at 4.10%. RBA has hinted earlier, just as many other central banks did, that it will take a 'wait-and-see' approach and the general feeling is that it will stick to it this month. Why? Simply because there was not any data released since the latest meeting in August that would warrant a return to rate hikes.
While the latest CPI report for July showed price growth slowing down from 5.4 to 4.9% YoY, it is still significantly above target range. Moreover, deceleration is not spotted in services inflation and prices in this category are expected to grow further in the coming months. Another factor that is likely to discourage RBA members from making a move at this meeting is an ongoing deterioration in the outlook for the Chinese economy. While Chinese authorities have launched a number of measures aimed at kickstarting the economy recently, it will take time for them to take effect. Last but not least, this will be the final RBA meeting under Phil Lowe as RBA Governor before he gets replaced by current Deputy Governor Michelle Bullock later this month. Having said that, Lowe may prefer to wait for the new leadership to make the next move. Nevertheless, this does not mean that RBA has given up entirely on rate hikes - a mention of a data-dependent approach is likely to be retained in the statement.
Taking a look at EURAUD chart at D1 interval, we can see that the pair has been pulling back recently. Sellers pushed the pair down to the 1.6700 support zone, where the bearish momentum eased. Pair is currently trying to bounce off this zone, marked with previous price reactions as well as the 50-session moving average (green line). Long, lower wick of today's daily candlestick suggests that there is a strong bull camp in the area. However, whether this rebound runs or dies will likely depend on the message sent by RBA tomorrow.
Source: xStation5
