When is RBA's SoMP and how might it affect AUD/USD?

The RBA’s Statement on Monetary Policy will be released at 11:30 am local time and will be providing full details on the Bank’s latest forecasts and their views on the risks to the outlook.

Markets are already anticipating that the RBA will hike in H1 2023. Analysts at ANZ Bank explained that much of this week has been about what the RBA thinks it will do.

''What we think the RBA will do can often be quite different. The resilience of the labour market and rising inflation expectations have us expecting wages growth at or above 3% by the end of 2022,' the analysts added.

''Adding this to the stronger global inflation pulse means we now see inflation lifting to 2.5% in Q1 2023. This will be the trigger for the RBA to tighten. This doesn’t mean policy is static until 2023.''

Additionally, the analysts argued that the RBA has already taken a number of tightening steps, such as discarding the yield target policy, that have implications for interest rates such as those on fixed rate mortgages.

''We think another tightening step will come in 2022 with the tapering in QE weekly bond purchases to $2 billion in February and then zero in May.''

How might the SoMP affect AUD/USD?

AUD/USD has recently taken out the 0.74 level following a liquidity run into the 0.7470 area and the focus is on the downside while below 0.7400. However, given the risk events ahead, such as the US Nonfarm Payrolls event, consolidation is in play and a drift to the upside targets 0.7410/20. The SoMP event its self is unlikely to make any great shakes for the RBA has already been forthcoming with their central tendency forecasts.  The Au-US 10-year spread has narrowed a further +3bp over the past 24 hours and it is whether the spread can narrow toward 15bps over coming weeks where the Aussie will be most affected. 

About the SoMP

The RBA Monetary Policy Statement released by the Reserve bank of Australia reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth.

It is considered as a clear guide to the future RBA interest rate policy. Any changes in this report affect the AUD volatility. If the RBA statement shows a hawkish outlook, that is seen as positive (or bullish) for the AUD, while a dovish outlook is seen as negatvie (or bearish).