AUD: Outlier for the time being – Rabobank

The RBA and the Norges Bank are vying for the position as the second most hawkish. In Rabo’s view, RBA rates are likely to remain on hold until May of next year, Rabobank’s FX analyst Jane Foley notes.

RBA rates are likely to remain on hold

“The fact that the RBA did not ‘explicitly consider a rate rise’ at its September meeting was judged by the market as a dovish development. That said, compared with most other G10 central banks, its position remains decidedly hawkish. Aside from the BoJ, the Norges Bank and the RBA all other G10 central banks have already embarked on a course of policy easing.”

“The decision by the Fed to cut rates by 50 bps last month widened the discussion about the prospect of other G10 central banks following suit. Last week, the RBNZ announced a 50 bp rate cut, and speculation is building that its policy meeting on November 27 could bring an even larger 75 bps rate cut (it is Rabo’s view that the RBNZ will lower rates by 50 bps next month).”

“Not only has inflation in New Zealand dropped back to target, but it is likely that its economy fell into recession through the middle of this year. We maintain our preference to buy AUD/NZD on dips towards a 3-month target of 1.11.”