AUD/USD: Recent gains built on shaky foundations – MUFG

Market expectations for aggressive charge hikes subsequent yr from the Reserve Bank of Australia (RBA) are probably to be disappointed, in accordance to analysts at MUFG Bank. They argue latest outsized features of the Australian greenback are constructed on shaky foundations.

Key Quotes:
“At the identical time the AUD has derived aid from the aggressive repricing of RBA price hike expectations.”

“Next week’s RBA coverage assembly (Tues) will be intently watched to see if they make any coverage changes and/or push again greater strongly in opposition to early fee hike expectations. While we can assume the RBA bringing ahead fee hike plans from the present day practise for no hikes earlier than 2024, it is one hell of a lengthy shot to assume the RBA to totally capitulate and begin planning for hikes as quickly as subsequent yr and becoming a member of the Norges Bank, RBNZ, BoE, BoC and Fed.”

“The RBA stays worried that underlying inflation pressures have been uncomfortably low over the ultimate six years averaging solely round 1.6%Y/Y. Similar to the ECB, we do no longer assume the RBA to be in a rush to reply to the cutting-edge length of greater inflation.”

“We doubt that latest AUD energy can be sustained past the near-term. Market expectations for RBA hikes subsequent 12 months will be disenchanted whilst the Fed starts offevolved to increase rates, and the poor increase influence from actual property weak spot in China will emerge as greater weight on the AUD going ahead as well.”

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