Australian Dollar: Hot CPI supports carry and RBA risk – BBH
Brown Brothers Harriman’s (BBH) Elias Haddad reports the Australian Dollar (AUD) is outperforming after hotter-than-expected July Consumer Price Index (CPI) data lifted Reserve Bank of Australia (RBA) rate hike expectations.
Australian Dollar (AUD) is outperforming after the hotter-than-expected July Consumer Price Index (CPI) data prompted an increase in Reserve Bank of Australia (RBA) rate hike expectations. The futures now almost fully price a 25 basis points hike to 4.60% by the end of the year. While the headline CPI rose 1.0% month-over-month (vs. 0.9% consensus) in July, it eased less than expected on an annual basis (3.5% vs. 3.3% consensus).
Despite the strengthening AUD, the risk still leans towards a prolonged pause in the RBA tightening cycle due to restrictive policy and a softening labor market, which are offset by strong carry and commodity exposure.
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