Market participants will be watching closely to see if the RBA adopts less hawkish forward guidance after the recent run of softer economic data from Australia. In that case, the Aussie could weaken, economists at MUFG Bank report.

RBA policy meeting in focus 

“After signalling at their last policy meeting that they expect further “‘increases’ in interest rates will be required over the months ahead, we expect the RBA to send a less hawkish signal this week after delivering one of those planned hikes. The softer GDP report for Q4 and CPI report for January argues for more caution from the RBA over the need for further hikes.” 

“We expect the Australian economy to be one of the most sensitive to higher rates amongst the advanced economies similar to the Canadian economy.” 

“A less hawkish message from the RBA could weigh modestly on the Australian Dollar in the week ahead.”

See – RBA Preview: Forecasts from 9 major banks, hiking for the fifth time by 25 bps