AUDUSD starts the week of economic data with a decision on interest rates by the Reserve Bank of Australia.
AUDUSD – Daily Chart
AUDUSD broke lower from the upward price channel and is trading at 0.6765. Forex traders should be on the lookout for harmful Australian data that could force the currency pair lower toward the 0.63-65 levels.
The Reserve Bank raised interest rates for the ninth time in February to a 10-year high of 3.3%. Australia’s Big Four banks expect another 0.25% increase on Tuesday, taking the bank’s benchmark rate to 3.6%. Interest rates are expected to rise twice in April and May, bringing the cash rate to an 11-year high of 4.1%.
However, Westpac chief economist Bill Evans expects the Reserve Bank will start cutting interest rates by the end of March 2024.
‘While we expect the economy to stagnate in the second half of 2023 there will not be sufficient progress in bringing inflation into line with the target before the end of 2023 to accommodate earlier rate cuts,’ he said.
AUDUSD Forecast Relies on RBA Announcement
Westpac forecasts the RBA will cut rates by a quarter of a percentage point by the March quarter of 2024, bringing the cash rate back down to 3.85%.
ABC news suggested the bank could push the economy toward an unnecessary recession.
“Like their global counterparts, the RBA remains fixated on the notion that if jobs numbers remain strong, inflation could become entrenched, which has only hardened its resolve to keep pushing rates higher. Eventually, they’ll get there. Higher interest rates at some stage will curb spending, cut profits, and result in mass layoffs. It could be a recession we didn’t have to have,” they said.
The United States economy will be light on economic data until the Non-Farm Payroll jobs release on Friday. That will mean the RBA rate decision and comments have more weight. Economists expect the RBA to hike rates again. Still, the press conference comments could be more critical to the AUDUSD exchange rate. Consumers have been struggling with higher inflation pressure on mortgages and food.
