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18.02.2025 12:46 AM
AUD/USD: February RBA Meeting Preview

The AUD/USD pair has consolidated around the 0.6300 level, following positive news from China regarding rising inflation and the recent postponement of mutual tariffs by Trump. However, despite the AUD/USD showing confident growth, it is risky to consider long positions on this pair at the moment. On February 18, the Reserve Bank of Australia will announce the results of its first meeting of the year, during which it is likely to reduce the interest rate for the first time in four years.

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Most analysts believe that the RBA is likely to lower interest rates by 25 basis points, bringing them down to 4.10%. This expectation gained traction after the release of the Q4 2024 inflation data. The Consumer Price Index (CPI) rose by only 2.4% year-over-year, which is the slowest growth rate since Q1 2021. This result was below analysts' forecasts, who had anticipated a decline to 2.5%. CPI has now decreased for two consecutive quarters. Furthermore, the trimmed mean core inflation index also fell to 3.2% year-over-year in Q4, marking its slowest growth rate in three years and continuing its downward trend for the second consecutive quarter. Notably, there was a long-awaited slowdown in services inflation, which had previously been increasing in Q2 and Q3. After peaking at 4.6%, services inflation dropped to 4.3%. This deceleration is particularly significant in light of the broader decrease in CPI.

Moreover, slowing inflation has coincided with weak economic growth in Australia. In late December, the government downgraded its GDP growth forecast for the current fiscal year (ending June 30, 2025). While earlier projections suggested an expansion of 2.25%, the revised forecast now points to growth of just 1.75%. Additionally, wage growth expectations have been cut from 3.4% to 3.0%, and consumer spending is now expected to rise by only 1.0% instead of the previously projected 2.0%.

The most recent report on Australia's economic growth (Q3 2024) was disappointing. All components of the release missed expectations. Quarter-on-quarter GDP growth stood at 0.3%, while analysts had forecast 0.5%. Annual GDP growth reached only 0.8%, below the projected 1.1%, making it the slowest pace of expansion since Q4 2020, when the Australian economy contracted by 1.0% due to the COVID-19 pandemic. Furthermore, GDP growth has been steadily declining for four consecutive quarters.

Australia's Q4 GDP data will be released on March 5, after the February RBA meeting. This means that the central bank will rely on the latest available data, including Australia's December labor market report, often called the "Australian Nonfarm Payrolls." The report was mixed. The unemployment rate increased to 4.0% after dropping to 3.9% in November. Meanwhile, total employment saw a substantial rise of 56,000 jobs, far exceeding the forecast of +25,000. However, part-time jobs drove the growth entirely, while full-time employment declined by 24,000. Since full-time positions typically offer higher wages and greater job security than temporary roles, the December figures cannot be classified as unambiguously positive despite the overall increase in employment.

In light of the current situation, the outlook suggests that a rate cut is likely at the upcoming RBA meeting in February. Additionally, there may be indications of a dovish stance regarding future easing measures. Should the central bank hint at another rate cut soon, the Australian dollar could face significant downward pressure, even amidst a broader market appetite for risk. While the anticipated rate cut has already been factored into current pricing, the future policy direction remains uncertain. Consequently, market participants will closely scrutinize the RBA's accompanying statement and comments from Governor Michele Bullock, as the tone of this communication will influence the trajectory of the AUD/USD pair.

Overall, this implies that holding long positions on AUD/USD is highly risky, despite the pair rising for three consecutive trading sessions. Given the importance of the upcoming RBA meeting, a wait-and-see strategy is recommended, with trading decisions ideally made after the central bank's announcement.

Irina Manzenko,
Especialista em análise na InstaForex
© 2007-2025
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