The Reserve Bank of Australia is anticipated to cut rates for the fourth time in as many months at 22:30 ET on Monday, with a Bloomberg News poll of economists calling for a 75 basis point reduction to a more than 6-year low of 4.50 percent. However, there is some potential for an even more aggressive move, as Credit Suisse overnight index swaps are pricing in at least a 100 basis point cut, which would bring the RBA's cash rate target to the lowest since December 2001. Such a move would likely weigh on the Australian dollar heavily. Overall, Australia is facing major headwinds from financial market instability, which has led to tighter credit conditions, as well as from both domestic and foreign demand. Indeed, global slowdown is hurting exports, something the Australian economy depends on for employment and broad growth. The situation has not been helped by significantly lower commodity prices, though it has served to cool inflation pressures, which leaves the RBA additional leeway to make monetary policy more accommodative in coming months.
The euro and British pound are also likely to respond to rate decisions this week. For more on this, along with an outlook for Friday's US non-farm payrolls (NFPs), check out our look at the 5 Key Economic Indicators for the Forex Market this week.