AUD/USD: Aussie to remain weak after a modest hawkish shift from the RBA – Wells Fargo
|On Tuesday, the Reserve Bank of Australia (RBA) kept rates unchanged and announced the end of its QE program. According to analysts at Well Fargo, the RBA made a modestly hawkish shift. They anticipate modest weakness in the Australian dollar versus the greenback over the medium term.
Key quotes:
“Australia's economy appears to be on a sturdy upturn, with a rebound in activity and quickening of inflation in the final quarter of 2021. Despite some near-term uncertainties, we believe these more solid economic trends can continue in 2022.”
“We believe inflation will remain elevated in the coming quarters and that by late this year the RBA will be confident enough to begin raising rates. Accordingly, we have made a modestly hawkish shift on our own monetary policy outlook, and now forecast an initial 15 bps rate hike in November 2022 and a cumulative 100 bps of rate hikes in 2023.”
“We also forecast an additional 100 bps of rate hikes over the course of 2023. Next year we expect 25 bps rate hikes at each of the RBA's February, May, August, and November meetings, which would take the Cash Rate to 1.25% by the end of 2023. Still, even with a more timely path for monetary tightening, RBA rate hikes should still lag behind those of the Federal Reserve and fall short of monetary tightening currently priced in by market participants. Accordingly, even with an outlook for a solid Australian economy and slightly faster RBA monetary tightening, we still anticipate moderate weakness in the Australian dollar versus the greenback over the medium-term.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.