This is going to be a bit of a tricky one. The "expectation" is that the RBA is going to raise the cash rate by 25 bps but as mentioned here last week, it is very much a close call. And even Australia's "big four" are split on the decision, with CBA and Westpac calling for a 25 bps rate hike while ANZ and NAB are seeing the central bank pause today.
The part that may not make sense unless you're paying close attention is that markets are pricing in quite the opposite. The OIS market is showing that the probability of a rate hike is only at ~34%. That means traders are pricing in some ~66% odds that the RBA will leave the cash rate unchanged, which runs against the so-called "expectation".
As such, be wary of the reaction in the Australian dollar later. It isn't going to be that much of a straightforward one. The RBA rates curve also implies just one more rate hike by year-end. So, if they do deliver on that today then it will depend on whether or not markets see this as being the final one.
If so, the aussie may catch a near-term bid but without any major hawkish lift, it is tough to see significant upside - at least one that is lasting. On the flip side, if the RBA does not hike and implies that they may be done, we'll see whether markets will tone down their expectations or stick with the idea that there might be just one more rate hike before year-end.
