Australian Dollar: RBA hold view caps near-term upside against US Dollar – ING
ING’s Francesco Pesole highlights that the Australian Dollar (AUD) is the only G10 currency gaining this week as hotter July inflation and strong household spending fuel hawkish Reserve Bank of Australia (RBA) expectations.
The Australian Dollar (AUD) is the sole G10 currency that gained value this week, driven by higher-than-expected inflation and robust spending by households, according to ING analyst Francesco Pesole. The Reserve Bank of Australia (RBA) is seen as hawkish, with markets pricing in a 28 basis points (bp) increase by year-end. However, ING believes the RBA will maintain its current stance due to benign inflation and a steady Federal Reserve.
House prices are falling and unemployment is rising, factors that are expected to become clearer in the upcoming 2Q GDP data. The RBA is likely to wait for more economic data before deciding on another hike. Markets are pricing in a 12bp move for their September meeting, but this could be unwound, limiting AUD gains for now. ING still expects a 0.730 target for AUD/USD by the end of the year, assuming a dovish stance from the Fed, which should benefit the currency even if AUD curves reprice in a dovish manner.
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