Australian Dollar: Tests resistance on firm inflation – OCBC
OCBC Bank strategists Sim Moh Siong and Christopher Wong note Australian inflation surprised on the upside, keeping alive the risk of another Reserve Bank of Australia (RBA) hike even as their base case is that the tightening cycle has ended.
OCBC Bank analysts Sim Moh Siong and Christopher Wong observe that Australian inflation exceeded expectations in July, raising concerns about another Reserve Bank of Australia (RBA) interest rate increase. Despite the base case suggesting the tightening cycle has concluded, markets now price a 25 basis point hike by February 2027.
This has contributed to the AUD/USD currency pair testing the resistance level of 0.7180-0.7200. The analysts remain optimistic about the Australian Dollar (AUD) in the next one to two quarters, citing its attractive carry and possible additional stimulus from China. However, they acknowledge that sticky inflation could still prompt another RBA rate increase.
In the medium term, they anticipate more gradual AUD gains as economic growth slows, inflation approaches the central target, and the RBA eases restrictive policies.
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