The Reserve Bank of Australia (RBA) meets on Tuesday for its policy meeting, with a decision expected at 04:30 GMT. No change in policy is anticipated at the May meeting. The vaccination progress in the country has some delays and a dovish statement could land a blow to the Australian dollar, which has been in a slightly upside tendency over the last couple of weeks.
RBA cash rate may remain steady again
During the coronavirus pandemic, the RBA has been one of the most dovish central banks across the world with strong quantitative easing and yield curve control programs. In the previous policy meeting on April 6, the RBA kept the cash rate steady at the all-time low of 0.1% as well as the target for 3-year government bond yield at around 0.1% and confirmed once again the size and the extension of its bond-buying plan.
No changes are predicted in interest rates and QE on May 4 as the RBA started the second round of A$100 billion in bond purchases a few weeks ago. Policymakers expect no change to the cash rate until mid-2023. However, investors will turn their attention to see if there is a change in the policy statement. In the previous week, the annual inflation rate in Australia jumped to 1.1% in the first quarter of 2021 versus 0.9% before, which was the highest figure since Q1 2020.
The success of combatting the pandemic and the massive monetary stimulus with generous fiscal support boosted the jobs market and consumer spending.
Coronavirus vaccine rollout delays
With over 29,700 infections and 910 deaths, the Covid-19 vaccine rollout started in late February, but the schedule has paused several times because of unexpected factors. The campaign is using the AstraZeneca and Pfizer vaccines with authorities having a goal to cover 26 million people by the end of 2021.However, the link between AstraZeneca and blood clots delayed that target. More than 2 million vaccine doses had been injected until Tuesday despite the 4 million that was the goal by the end of March.
Aussie fails to increase strong momentum
In FX markets, aussie/dollar is neutral-to-bullish, holding above the bullish crossover within the 20- and 40-day simple moving averages (SMAs). If the price successfully surpasses, the 0.7840 level, it could open the way for the more-than-three-year high of 0.8006, while steeper upside movements may hit the January 2018 high of 0.8130.
On the other hand, the price could be at risk of further bearish movement if it falls below the SMAs. Price action is likely to slip towards the 0.7570 barrier before tumbling to the 200-day SMA, which overlaps with the 0.7464 support. A leg lower could open the door for the 23.6% Fibonacci retracement level of the upward wave from 0.5505 to 0.8006 at 0.7415.
In conclusion, combined with the global vaccine rollouts and the growing expectation of a swift, full recovery, Australia’s domestic strength is encouraging the consumer to maintain an optimistic outlook.
