The AUDUSD exchange rate looks bearish ahead of the latest RBA interest rate meeting.
AUDUSD – Weekly Chart
After breaking from its downtrend, AUDUSD has been in a consolidation phase since March this year.
Australians are finding peace after an aggressive rate hike cycle from the Reserve Bank of Australia over the last year. At last month’s meeting, the RBA chose to keep its benchmark interest rate at 3.6%.
Despite some inflation concerns and the lowest unemployment rate in 50 years, economists and the major banks are tipping the RBA to pause on another rate rise in May due to signs that consumers and households are cutting back.
However, some analysts have warned that homeowners could be dragged down with an 0.25% rise as inflation only dropped from its peak of 7.8% in December to 7% in the March quarter. Westpac chief economist Bill Evans has scrapped an earlier forecast for a rate rise in May. He now believes the RBA will halt its rate moves, although future increases are uncertain.
“Given the uncertainty around the current outlook and a need to contain inflation expectations, the board is almost certain to maintain its clear tightening bias,” Evans said.
“However, as we move through the remainder of 2023 the credibility of that bias is likely to fade.”
Evans said that the latest inflation numbers align with the RBA’s forecast path for eventually returning to the 2 to 3% inflation target. He added that it would be unlikely to make more calls on rates until the August meeting after more inflation data is presented.
Traders should look for a break below the 0.650 level for further losses in the AUDUSD.
