The Reserve Bank of Australia (RBA) will announced its July monetary policy decision later today.
While there’s next to no chance that the bank will tweak rates, there’s likely to be a bit of interest in what it has to say about the Australian dollar given recent falls.
This excellent chart from Westpac’s Global Head of Market Strategy, Robert Rennie, shows the evolution in RBA language towards the Australian dollar over the past three years.
In recent months, the RBA has said, “the Australian dollar remains within the range that it has been in over the past two years,” adding that an “appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast”.
Given the Aussie has been falling recently, especially against the US dollar, there’s naturally a bit of speculation that the RBA may alter this view today.
With the AUD/USD sitting just above 18-month lows and net positioning among speculators short, any softening in language from the board would likely lead to one almighty short-covering rally in the Aussie.
It’s unlikely the RBA would seek such an outcome.
The RBA July monetary policy statement will be released at 2.30pm AEST.