AUD/CAD – RBA Downplays Omicron’s Impact On Australian Economy

#OPINIONLEADER#

 DEC 8, 2021

• RBA to review QE during February 2020 meeting
• BoC expected to keep monetary policy unchanged
• Straddle setup in AUD/CAD (H4)

Chart 1: AUD/CAD H4 chart

The Reserve Bank of Australia (RBA) kept its monetary policy unchanged as widely expected yesterday. The central bank expressed a slight tone of optimism, indicating that the emergence of the COVID Omicron variant is not expected to hinder the ongoing economic recovery in Australia although it is a new source of uncertainty. The RBA is still expecting the Australian economy to return to its pre-Delta state during the first half of 2022. The Australian central bank also mentioned that a review on the quantitative easing (QE) program will be carried out during its February 2022 meeting.

Similar to its Australia counterpart, the Bank of Canada (BoC) is also expected to make no changes to its monetary policy during the meeting later today. However, the BoC may be sharing their views on how the Omicron variant can impact their decision on monetary policy. Having ended the central bank’s QE program, the next step will be to consider interest rate hike. Hence, any signs of delaying the rate hike may be adverse for the Canadian dollar.

Since the start of this week, AUD/CAD has been trading within a 50pips range. Despite the strengthening due to the RBA’s slight optimism, AUD/CAD’s attempt to move higher was short-lived. Nonetheless, the upcoming BoC monetary policy decision may push AUD/CAD out of its consolidation and present a clearer trading direction.

Trade Setup for AUD/CAD (H4)

Buy Stop at 0.9050

Sell Stop at 0.8950

Upcoming news that may impact price movement of AUD/CAD

08 December – Bank of Canada monetary policy decision announcement at 2300 (GMT+8)

09 December – Reserve Bank of Australia Governor Lowe speaking at 0605 (GMT+8)

10 December – Bank of Canada governing council member Gravelle speaking at 0300 (GMT+8)

15 December – Canadian CPI m/m data release at 2130 (GMT+8)

16 December – Australian flash PMI data release at 1800 (GMT+8)

16 December – Australian employment data release at 0830 (GMT+8)

21 December – Reserve Bank of Australia monetary policy meeting minutes release at 0830 (GMT+8)

23 December – Canadian GDP m/m data release at 2130 (GMT+8)