Australian Dollar: Hawkish RBA hike expectations – ING

ING’s Francesco Pesole expects the Reserve Bank of Australia to deliver a 25bp rate hike to 4.60%, with Governor Bullock likely leaving the door open for further tightening. Persistent inflation concerns, tight labour markets and resilient growth underpin this view. ING sees the Australian Dollar supported and forecasts AUD/USD returning to 0.720 by year-end.

RBA seen extending tightening bias

"The Reserve Bank of Australia announces its policy decision at 05:30am BST tomorrow, and we expect a 25bp rate hike to 4.60%. Markets are fully pricing in the move, and consensus is unanimously calling for it. That means the Australian Dollar's reaction will be heavily dependent on whether Governor Michele Bullock will leave the door open for more hikes. We think she will."

"That’s because inflation concerns remain elevated, and even if crude prices decline, domestic fuel prices are set to remain sticky for longer. Core CPI measures have all remained hot, the labour market is tight, and growth has proven stronger than expected."

"We therefore expect markets to retain expectations for further tightening after the meeting, offering support to AUD. We still expect AUD/USD to return to 0.720 by year-end."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)