RBA Interest Rate Decision

Chapter 26 RBA Interest Rate Decision

Australia: The Reserve Bank of Australia Raised the Interest Rate from 2.85% to 3.10% Similar to Expectations

Summary:

Eyes and Ears earlier today on the Reserve Bank of Australia interest rate decision that was released on December 6th, 2022. The RBA meeting earlier led to an increase of 25 bp in interest rates where traders, central banks, and governments are watching what will the rest of the central banks will do regarding rate increases in the upcoming meetings.

Recommended Entry Price:

AUDUSD:

Entry Price: 0.67420

Target Price: 0.67800

SL Price: 0.66900

1. Fundamentals

In today’s article, we will discuss the effect of the three different options of a rate increase. To start with, it is important to know that the RBA is increasing the interest rate to fight inflation. While this might be a short-term solution for inflation, it will have a massive effect on the market in the future, and a recession is expected. As a rule of thumb, a higher-than-expected rate is bullish for the AUD, and a lower-than-expected result is bearish for the AUD.

What could have happened if the RBA did not increase the rate by 25 bp?

A lower-than-expected interest rate decision will lead to a weaker AUD versus major currencies.

What could have happened if the RBA increase the rate by more than 25 bp?

A more-than-expected rate decision is considered bullish for the AUD, and it will gain momentum versus other major currencies.

What did happen?

The RBA decided to increase the interest rate by 25 bp as expectations. In this case, the market will not move a lot as this result was already expected and took effect on the market when it first was announced, that’s why no major effect on the AUDUSD pair was monitored.

2. Technical Analysis

AUDUSD Intraday Chart

RBA Interest Rate Decision-Pic no.1