Rba Decision In Focus
The Reserve Bank of Australia is due to set rates on Tuesday. Markets expect a 25 basis point rise to 4.10%, which would be a second straight increase. Inflation remains above the 2%–3% target band, with trimmed mean inflation still elevated. Australia’s employment report is due on Thursday, with forecasts of 20.3K new jobs and unemployment edging up to 4.2%. US Dollar moves were shaped by easing worries about a Strait of Hormuz closure, reducing safe-haven demand. The NY Empire State Manufacturing Index for March came in at -0.2 versus a 3.2 forecast. The Federal Reserve decision on Wednesday is expected to keep rates at 3.75% and include an updated Summary of Economic Projections.Policy Divergence And Trade Setup
Looking back at the market in early 2025, we saw the AUD/USD pair trapped in a choppy range around the 0.7100 handle. The dynamic was driven by a hawkish Reserve Bank of Australia, which hiked rates to 4.10%, while the US Federal Reserve was signaling a pause. This divergence in central bank policy set the stage for the trend we have seen over the past year. That policy gap has since widened significantly, benefiting the Aussie dollar. The RBA has held its cash rate steady at its peak of 4.35% as Q4 2025 inflation, while lower, was still stubborn at 3.4%. In contrast, the Fed began its cutting cycle late last year and has now brought the Fed Funds Rate down to 3.25% in response to slowing growth and inflation nearing their target. This interest rate differential in Australia’s favor provides a strong positive carry, making it attractive to hold long Australian dollar positions. The US economy showed signs of this weakness back in 2025, and that trend has continued with recent data showing US Q4 2025 GDP growth at a soft 1.2%. This confirms the Fed’s reasoning for easing policy and continues to weigh on the US dollar. For derivative traders, this environment suggests maintaining a bullish bias on AUD/USD. With the pair currently trading near 0.7480, buying call options with strike prices above 0.7500 could be a strategic way to capture further upside while defining risk. We should look for volatility to remain relatively low as long as central banks stick to their current, predictable paths. Create your live VT Markets account and start trading now.
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