If we do see a rate hike, the big question is will it be by 15 bps to 0.25% or by 40 bps to 0.50%?
Or will the RBA push the decision to June considering that it is election month in Australia? That certainly is a plausible consideration as well.
Either way, the risks are rather skewed to the downside for the aussie in my view. A 15 bps rate hike will meet market expectations and while that sets out the start of the tightening cycle, it isn't anything that hasn't already been priced in:
I can see the aussie gaining some light ground on that but it wouldn't be anything significant.
As things stand, I would say only a 40 bps rate hike will really get the aussie jumping. Meanwhile, a decision not to hike the cash rate at all will be rather detrimental for the currency and could see AUD /USD run to test 0.7000. I shared some thoughts on that yesterday here.
In case you need a reminder of how things went down in April:
