The general consensus amongst AUD dealers would seem to be that a 25bps rate cut is very highly likely and this is in effect already priced in. If this eventuates, then the AUD/USD would probably stay relatively unchanged, perhaps gapping around in a 40 pip range as short-term positions exit the market.
In my opinion, both a 50 bps rate cut and a ‘no cut’ decision could have a significant impact. The former would show that the RBA is seriously worried about current events, so we should also be seriously worried, therefore the AUD/USD would fall by 75pips+ in my opinion. A ‘no cut’ decision would catch the market short and bearish and the subsequent short-covering rally might well extend beyond 100 pips.
