At the last RBA meeting, the RBA announced the end of their QE program. The three previous tests that the RBA had set were met, but the RBA were very quick to kick back against the expectations that this would mean a near term increase in the interest rates. However, markets struggled to accept the RBA’s bearish mandate. The near term AUD strength since the last meeting has been on the credibility of the RBA.

Rate hikes coming?

Since the last RBA meeting, on Feb 10, Governor Lowe has conceded that it is ‘plausible’ it could ‘increase rates later this year’ depending on the economy and evidence in inflation will only emerge over time. A possible rate hike this year was confirmed on Feb 11 when Governor Lowe said that there is a big deviation between what the market expects the RBA to do on rates and what the RBA wants to do. However, Governor Lowe did still say that a rate increase could be on the agenda this year, but that would like to see a couple more CPI’s before deciding.

What the RBA wants to see

In the last statement, the RBA said, ‘Wages growth also remains modest and it is likely to be some time yet before aggregate wages growth is at a rate consistent with inflation being sustainably at target. The Board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve.’ So, one of the key inputs that the RBA is looking for is wage growth as that is a key boost for inflation. Therefore, this week’s wage price index print is very important for the RBA. If the print comes in above 2.4%y/y then expect the AUDJPY pair to race higher. However, remember that any risk-off trading will see strong bids come into the JPY and weaken the AUDJPY. So, keep geopolitical risk aware as the print is released.

AUDJPY


Learn more about HYCM

Our products and commentary provides general advice that do not take into account your personal objectives, financial situation or needs. The content of this website must not be construed as personal advice.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD treads water just above 1.0400 post-US data

EUR/USD treads water just above 1.0400 post-US data

Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.

EUR/USD News
GBP/USD remains depressed near 1.2520 on stronger Dollar

GBP/USD remains depressed near 1.2520 on stronger Dollar

Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.

GBP/USD News
Gold keeps the bid bias unchanged near $2,700

Gold keeps the bid bias unchanged near $2,700

Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.

Gold News
Geopolitics back on the radar

Geopolitics back on the radar

Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.

Read more
Eurozone PMI sounds the alarm about growth once more

Eurozone PMI sounds the alarm about growth once more

The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Majors

Cryptocurrencies

Signatures