AUD/USD: Greenback Gains Over Aussie on RBA Speculations

Just like how the Baltimore Ravens edged the San Francisco 49ers to win the Super Bowl XLVII, the US dollar is looked forward to get the better of its trades with the Australian currency today on investor speculations that the Reserve Bank of Australia will issue a surprise rate cut tomorrow.

Assumptions of a surprise rate cut by the Reserve Bank of Australia are putting a damper on the Aussie’s advances. The Australian central bank holds its first policy meeting of the year tomorrow. The Aussie dollar has been on a robust hike in recent weeks, and currency strategists are presupposing that the RBA could use the opportunity to deliver a surprise interest-rate cut to underpin the economy and dent the Aussie’s strength. Its latest move was a quarter-point cut in December and was recent enough for many economists to say the RBA will hold its fire this month. Markets put the chances of a rate cut this week at just 18 percent. Some analysts say that with inflation benign and data still pointing to weakness in some sectors of the economy, further monetary easing should not be ruled out.

Considering the effect of these speculations on the exchanges of the Aussie, a short position is suggested for the AUDUSD. However, be on the lookout for probable technical corrections especially as US Factory Orders are scheduled for release today.

Factory orders in the world’s largest economy rose in December by the most in three months, according to estimates by economists. Forecast is that bookings rose by 2.3 percent after little change was registered in November. That would follow data from last week showing payrolls expanded by 157,000 in January following a revised 196,000 advance in the prior month and a revised 247,000 surge in November.

Aviv N. Shapiro is a Senior Research Analyst and Business Development Officer for AlgosysFx.