With the Australian dollar trading around the Reserve Bank of Australia's (RBA) preferred level of $0.75, will the central bank hold off on cutting rates at Tuesday's meeting?
Markets are pricing in an 80 percent chance of a cut, but analysts were largely divided over whether it would come in April or May. The S&P ASX 200 was up more than 1 percent Tuesday ahead of the decision.
According to Mitul Kotecha, head of FX strategy, Asia-Pacific at Barclays, the RBA is likely to pull the rate cut trigger sooner rather than later given the recent collapse in iron ore prices – a key export for Australia.
"It's interesting, the RBA had said they were comfortable with the Aussie dollar at $0.75, but the reality [is] now commodity prices, [such as] iron ore, have fallen even further. They probably want to see[the Australian dollar] even lower now," Kotecha told CNBC.
Last week, iron ore prices fell below $50 a tonne for the first time in a decade on concerns over a supply glut and soft Chinese demand. Iron ore accounts for close to one-fifth of the value of Australia's total exports.
"I think $0.75 is gone, I think it's probably in the region of towards $0.70 if anything," Kotecha said, adding that Barclays recently moved its call for a rate cut forward to April from May.