Reserve Bank of Australia (RBA): monetary policy and AUD impact

The Reserve Bank of Australia (RBA) is the Commonwealth of Australia's central bank, founded 1960. It manages the Australian dollar (AUD), 5th most-traded currency in the world despite an economy of only $1.7T GDP.

Specifics: - 11 meetings per year (1st Tuesday of each month except January) — among G10's highest frequency - Decisions communicated Tuesday at 2:30pm (Sydney time = 5:30am Paris) - The board has 9 members: Governor (Michele Bullock, first woman in this role since Sept 2023), 2 Deputy Governors, 6 external members - Unusual triple mandate: price stability (CPI 2-3 %), full employment, economic prosperity - Main tool: cash rate (equivalent to fed funds rate)

In 2026, RBA cash rate is 3.85 % (after 4.35 % peak in 2024, several cuts since). Market still anticipates 1-2 more cuts in next 12 months if inflation keeps falling.

Notable feature: RBA had no technical recession for 30 years (1991 to 2020). Country then crossed its first Covid recession but quickly recovered. This gives RBA a reputation as a pragmatic and effective central bank.

The Australian dollar is the archetype commodity currency. Its value depends 60-70 % on commodity prices exported by Australia: iron ore (28 % of exports), coal (15 %), liquefied natural gas LNG (12 %), gold, beef, wheat, dairy.

The China factor: 35 % of Australian exports go to China, mainly iron ore to make steel. If Chinese economy slows (2021-2024 real estate crisis), iron demand drops → iron ore price falls → AUD falls.

Typical cascade: 1. Chinese manufacturing PMI down (published 1st of month) 2. → traders immediately short AUD/USD (-30 to -80 pips in day) 3. → BHP, Rio Tinto (FTSE 100's 2 largest miners) fall in London 4. → ASX 200 opens lower next day 5. → RBA under pressure to cut rates

AUD/USD correlation with iron ore price: ~0.65 over 5 years (very high). To trade AUD intelligently, follow Dalian Iron Ore future (DCE Iron Ore) on Investing.com.

Risk seasons: - Chinese New Year (late January-February): Chinese economy slows 2-3 weeks → AUD vulnerable - China PMI (1st and 15th of month): instant AUD/USD volatility - RBA Tuesday (1st Tuesday of month): 50-150 pip volatility

Timezone challenge: RBA announces at 5:30am Paris in winter (4:30am summer). Worst timing for European trader — either you wake at 5am or miss initial move.

Practical strategy:

1. Evening before (Monday 10pm Paris): check RBA calendar + Bloomberg/Reuters consensus. If decision expected, identify probable scenario.

2. At wake-up (7-8am Paris): decision has been public for 2-3h, market has digested. Read: - The decision on rba.gov.au (rate + statement) - Michele Bullock press conference (3pm Sydney = 6am Paris) — often more important than the decision itself

1. Entry at 8-10am Paris: European market opens, maximum liquidity, possible entry in breakout direction.

Pairs most exposed to RBA: - AUD/USD: most direct, 50-150 pip move on announcement - AUD/JPY: amplifies moves (yen carry trade) - AUD/NZD: Oceania cross, modest moves - EUR/AUD: indirect but sensitive

Weekend timing risk: AUD forex closes Friday night to Saturday at 7am Paris (Sydney close). Position open Friday evening can suffer Monday morning gap if major news arrives weekend (e.g., Chinese real estate collapse). Guaranteed stop recommended at brokers offering it (IG, eToro Pro).