- English
- 简体中文
- 繁体中文
- ไทย
- Tiếng Việt
- Español
- Português
- لغة عربية
RBA meeting preview - a traders' view on where the risks reside
The market therefore expects big movement across the AUD pairs, so this should have big implications for one’s approach to risk and position size. It means the market sees the RBA meeting as a core risk and one where we could see a sizeable move on the day – up or down.
In the video above, I portray how clients are largely positioning for AUDUSD upside, although this seems a greater reflection of expected USD weakness – while the broad array of FX players are running a short AUDUSD exposure, which in theory should limit the downside in AUD.
Where I do see AUD vulnerability is in the current interest rate pricing - a 15bp hike is firmly priced into short-term rates markets, so if the consensus is correct and the cash rate is lifted from 10bp to 25bp, it shouldn’t move the dial too intently. However, with expectations of 38bp of hikes priced for June and 250bp (or 10) hikes priced for the full year, if the statement doesn’t justify this pricing, we could see AUD sellers.
With estimates that the RBAs neutral rate setting (the cash rate setting that is neither stimulatory nor restrictive) sits at 1.70%, if the RBA were indeed to take the cash rate to 2.5% by year-end the market may see that as overly restrictive – so, traders will be watching to hear the RBA’s statement and the urgency to take the cash rate higher versus what’s priced into rates.
With the FOMC meeting also due out on Thursday (4:00am AEST) it promises to be a lively week in FX markets – so see our thoughts on trading the RBA meeting and how to position exposures from a risk perspective. Trade the possibilities with Pepperstone.
Related articles
Ready to trade?
Switch to Pepperstone now and join our global community of over 620,000 traders. Apply in minutes with our simple application process.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.