Tuesday’s RBA (Reserve Bank of Australia) meeting carries the potential to bring a lot of volatility to the market. Many think the RBA will cut Australian interest rates Tuesday in an attempt to stimulate the economy.
If Australia were to cut rates, it would likely be a cut of 25 basis points (.25%). If the central bank cut the rates by 50 basis points (.5) it would put Australia on the same page as New Zealand with interest rates of 2.50%. I think dropping rates to 2.50% could be a strong hit to the sentiment of the Australian economic well being since the AUD rate has been the highest for many years.
The majority of economists seem to expect the RBA will leave rates unchanged according to CNBC. However, anything is possible so, economists and investors a like will keep their eyes on the news tomorrow as the RBA meets.
The Australian Dollar could be heading to the 1.022 area prior to the RBA meeting. When the RBA cut interest rates in December to 3.0%, we saw some AUD strength but nothing that was sustained for long.
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