Aussie rate cut in the balance | May holiday in the UK - general election to come

In the early hours of tomorrow morning in GMT terms, the Reserve Bank of Australia will announce its decision on possible interest rate cuts and make a statement on the matter. The central bank is balanced on a knife-edge between the need to reduce rates in order to relieve pressure on exporters who need a lower value in the currency, or to keep them at the present level so that there will not be worsening of the residential property bubble that concerns them so much.

The AUDUSD pair has been on a uptrend, even if it took something of a hit towards the end of last week. It can be seen from the chart that the exchange rate broke through the 200 period EMA on the four-hour time period which had previously acted as resistance, but has now become support. The decision on rates will be key to its performance.

The RBA governor, Glenn Stevens, is on record as saying that the Aussie dollar is too high. Up to now he and his colleagues seem to have been depending on the US Federal Reserve starting to raise US rates and thereby reducing the pressure on the Aussie unit but, while this will come eventually, it is taking rather longer than the Australian monetary authorities would like. So – to lower or not to lower? We will know tomorrow morning.

May holiday in UK – followed by the general election

Today could be a quiet day on the Forex markets (provided always that there are no surprise announcements concerning, for example, Greece) as it is the May Holiday today and London traders will not be at their desks. Later in the week, on Thursday, Britain goes to the polls for the 2015 general election. This, seemingly, is too close to call at present so whatever happens can be expected to lead to some volatility in the markets, and around the Pound Sterling in particular.