Aussie Appreciates Ahead Of RBA Decision Day

The Aussie dollar was among the best performers in G10 FX space Monday, ahead of today's announcement of the RBA's first monetary policy decision this year. AUD/USD snapped its three-day losing streak and posted a decent rally, as last week's risk aversion receded, which provided another tailwind to the pair.

• The RBA is expected to leave its cash rate target unchanged, declare the end of its QE scheme and adapt its forward guidance on interest rates on the back of a tighter than expected labour market and firmer than expected inflationary pressures. We believe the RBA will remain non-committal when it comes to the timing of future rate hikes (see more in our full preview).
• Elsewhere, retail sales and housing finance data will be eyed today, before trade balance & NAB Business Confidence take focus on Thursday.
• Finally, RBA Gov Lowe may provide some more clarity on the Reserve Bank's thinking on Wednesday, while the quarterly SoMP will be published on Friday.
• AUD/USD overnight implied vol last seen at 13.99% after printing a seven-week high on Monday, while spot AUD/USD trades flat at $0.7066. The rate needs to pierce Jan 7 low of $0.7130 to ignite bullish expectations. Conversely, a sell-off past Jan 28, 2021/Jul 16, 2020 lows of $0.6968/63 would shift bearish focus to Jul 14, 2020 low of $0.6921.