The Australian Dollar to US Dollar AUD/USD exchange rate is expected to be highly volatile this afternoon when the Reserve Bank of Australia (RBA) announce their April Rate Decision at 2:30pm AEST. The Official Cash Rate (OCR) in Australia is currently sitting at 2.25% after being cut 25 basis points in February and being placed on hold in March. The economic consensus is that the RBA will cut interest rates by a further 0.25% today.
This economic release has been a hot topic of conversation between economists and investors for weeks now, with opinions regarding whether or not the governing body will cut interest rates further being divided. Many currently take the standpoint that the RBA will indeed cut interest rates by 0.25% to a record low of 2.0%. The increased expectation towards the RBA cutting interest rate has placed downward pressure on the AUD/USD exchange rate over the couple of weeks.
If the RBA do proceed with an interest rate cut this afternoon, the AUD/USD exchange rate is likely to move towards a 6 year low. Conversely, a decision to keep interest rates on hold at 2.25% will likely provide some unexpected strength for the ‘Aussie’ (AUD) against the ‘Greenback’ (USD). Regardless of the actual result, the AUD/USD exchange rate will be highly volatile surrounding the announcement.
The AUD/USD exchange rate was buoyed temporarily last week resulting from poorer than expected US employment data, but now that the market has digested this, all the focus will be on today’s RBA rate decision.
Australian Dollar to US Dollar (AUD/USD) Exchange Rate Forecast
The short-term direction of the AUD/USD exchange rate will of course be determined by the result of the RBA April Decision this afternoon, however, regardless of the actual result it can be strongly argued that the Australian Dollar will remain under continued pressure against the US Dollar looking forward.
The US Federal Reserve will release the Minutes from their March Meeting on Thursday evening. This will provide a deeper insight into the timeframe of the much anticipated interest rate hike in the US and could serve to further weaken the AUD/USD exchange rate, especially if the Minutes indicate a timeframe sooner than the current expectation of June this year.
An interest rate rise out of the US economy appears inevitable at some stage this year, contributing to the likelihood of a declining AUD/USD exchange rate in the medium-long term and positioning the ‘Aussie’ (AUD) in a state of vulnerability against the ‘Greenback’ (USD).