Hawkish RBA Statement Supporting AUD

After the RBA hiked rates to 7.00% last week, the RBA interest rate statement was largely neutral, as to it focused on both downside risk and upside risk to inflation. It had lead to some doubts as to would the RBA continue its rate hiking policy further, in face of global rate cutting cycle.

However, the RBA has livened up the Australian Dollar right at the start week, by the hawkish statement in its quarterly statement on monetary policy. This following paragraph from the quarterly statement on monetary policy best highlights the RBA hawkishness...

On the current outlook, then, and allowing for the inevitable uncertainties in forecasting, the risk of inflation remaining uncomfortably high for some time is considerable. Absent a further shift in economic risks to the downside, therefore, monetary policy is likely to need to be tighter in the period ahead.

On back of these new developments, which suggest that the RBA rate hiking cycle is yet not over, the AUD has had a nice rally so far, and it is likely to stay supported in the intermediate term, against all currencies. The most support for the AUD however is likely to come against the CAD, which too is a commodity currency like the AUD, however the CAD is facing a rate cutting cycle, unlike the AUD.

Kshitij Consultancy Service
http://www.fxthoughts.com

Legal disclaimer and risk disclosure

These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.