What does lockdown mean for next week’s RBA meeting?

In early June, two local banks, rightly impressed by the strength of the economic recovery brought forward the date they expected the RBA to start rate hikes, to early/mid-2023, in contrast to the RBA’s “2024 at the earliest” forward guidance.

Trader 1

Following the release of jobs data for May in mid-June, which saw the unemployment rate fall to pre-pandemic levels at 5.1%, a third local bank brought forward its RBA lift-off expectations date to November 2022.

Today after a fourth Australian capital city Brisbane joined three others in lockdown to thwart the spread of the Delta variant, there are now over 12 million Australians locked down unable to leave their homes, except for essential reasons including shopping and exercise.

The result of the outbreak has been a dramatic loss of reputation for the Australian Federal government following its tardy vaccine rollout and also for the NSW government given its delayed decision to lockdown the suburbs at the center of the Sydney outbreak.

The risks of wider and extended lockdowns are likely to warrant consideration at next Tuesday's RBA meeting. More so given the July meeting has been set up as a key one for a decision on the future direction of monetary policy.

As such, the RBA is likely to emphasise that considerable uncertainty remains and that substantial support is still required, mindful that important financial support programs such as Jobkeeper expired in late March.

It may also take the opportunity to push back against the more aggressive pricing of interest rate hikes that have followed the big bank's calls. As of yesterday, the OIS curve had 38bp of hikes priced for year-end 2022 and 71bp for year-end 2023.

While this would be a welcome development for the local equity market, it would be an unwelcome turn of events for the AUDUSD, which remains out of favour following the more hawkish FOMC meeting.

Technically the AUDUSD remains at risk of a deeper decline and to negate downside risks it needs to see a sustained recovery back above the 200-day ma at .7660 followed by a break and daily close above last week’s .7616 high. Aware that until this occurs, allow for a decline towards .7200c.

What does lockdown mean for next week’s RBA meeting

Source Tradingview. The figures stated areas of the 29th of June 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

More from AUD


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.