Forex
Home›Forex›Major Pairs›AUD/CAD faces deeper correction if RBA tightening bias…
AUD/CAD faces deeper correction if RBA tightening bias fades
With the RBA widely expected to hold the cash rate at 4.35% on Tuesday, traders will focus on whether policy language and the Statement on Monetary Policy confirm the tightening cycle has ended.
Action Forex says AUD/CAD risk is asymmetric ahead of the RBA’s Tuesday decision, with the key question being whether the central bank’s tightening bias survives rather than the decision itself. The outlet notes the RBA is widely expected to leave the cash rate unchanged at 4.35%, making the hold largely a formality.
According to Action Forex, Australian banks have aligned that rates are likely to stay on hold through the rest of 2026, with the next move expected to be a cut sometime in 2027. The report argues that preserving a tightening bias may offer only limited support to the Australian dollar, while clearer confirmation that the tightening cycle has ended could weigh more heavily.
Action Forex points to the RBA’s policy statement and language as an early signal, particularly whether the board retains wording that it remains attentive to upside risks to inflation. Keeping such language would be viewed as a hawkish hold that preserves optionality, while shifting toward text implying policy is sufficiently restrictive or removing explicit upside inflation emphasis would suggest 4.35% is closer to a peak.
The outlet adds that the quarterly Statement on Monetary Policy is likely to be more consequential, given recent data, including a Q2 inflation undershoot versus the RBA’s own 3.6% projection. It says forecasts that maintain or bring disinflation back toward the 2% to 3% target band more quickly could validate that further tightening is unnecessary, while pushing the return to target further out could indicate policymakers are not fully convinced by the latest inflation moderation.