The Reserve Bank of Australia (RBA) is likely to keep its cash rate at 3.60% until 2026, according to a Reuters poll. All 38 economists surveyed think the RBA will maintain this rate after its meeting on December 9. The poll shows a change in economic expectations. Last month, more than 60% believed the RBA would cut rates by mid-2024. Now, less than a third think so. Out of 33 economists predicting until 2026, 19 expect the rate to stay at 3.60%, 10 think there will be at least one cut, and four foresee an increase. The RBA affects the Australian Dollar (AUD) by setting interest rates and creating monetary policies. It uses methods, such as quantitative easing (QE) and tightening (QT), to manage these rates and support economic stability. Economic indicators, like GDP and employment data, influence the AUD’s value. QE typically weakens the AUD by increasing liquidity, while QT strengthens it by reducing liquidity. Currently, the AUD/USD pair rose by 0.01% to 0.6615. With a strong agreement that the RBA will keep the cash rate at 3.60%, lower market volatility is expected in the coming weeks. This is a big shift from last month when many anticipated rate cuts. The RBA meeting on December 9 is now viewed as likely to confirm this stable outlook. This expectation is backed by recent data showing a strong economy. The latest monthly CPI shows inflation at 3.5%, still above the RBA’s 2-3% target. The unemployment rate remains low at 4.1%, giving the central bank little reason to cut rates soon. For options traders, this suggests that implied volatility on Australian dollar options may continue to drop. Selling volatility may be a good strategy, such as using short strangles or straddles on the AUD/USD pair. These positions can be profitable if the currency stays within a narrow range, which seems likely without any surprises in interest rates. Globally, the RBA’s position contrasts with central banks like the U.S. Federal Reserve, where talks of rate cuts for mid-2026 are increasing. This difference in policy should support the Australian dollar. Traders might return to carry trades, where they borrow in lower interest rate currencies to invest in the higher-yielding Aussie. With AUD/USD trading near 0.6615, range-trading strategies seem the best option. Buying the Aussie on dips could be advantageous, given the favorable interest rate differential should help the currency hold its ground. However, without any rate hikes on the horizon, significant upward movement past recent highs seems unlikely in the near term.

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