AUD: RBA holds rates at 3.60%, signals hawkish pause – BBH

The Reserve Bank of Australia (RBA) kept its cash rate steady at 3.60%, emphasizing an end to easing and hinting at the potential for a future hike, while AUD/USD rebounded toward 0.6650 with resistance near 0.6700 awaiting direction from tomorrow’s Fed decision, BBH FX analysts report.

Bullock rules out near-term cuts, eyes potential hike

"RBA delivers a hawkish hold. As was widely expected, the RBA Board voted unanimously to keep the policy rate unchanged at 3.60% for a third consecutive meeting. The RBA also stressed it’s done easing, warning “the risks to inflation have tilted to the upside” while dropping past reference to two-way uncertainty about the outlook."

"Importantly, RBA Governor Michele Bullock stressed 'I don’t think there are interest rate cuts in the horizon for the foreseeable future…The question is, is it just an extended hold from here or is it possibility of a rate rise. I couldn’t put a probability on those but I think they’re the two things that the board will be looking closely at coming into the new year'. RBA cash rate futures imply nearly a full 50bps rate increase to 4.10% over the next twelve months."

"AUD/USD initially slipped, then bounced back to recent highs near 0.6650, with limited follow-through given it’s already near the level implied by AU-US interest rate expectations. AUD/USD faces major resistance at 0.6700. Tomorrow’s Fed outcome will dictate whether AUD/USD clears it or stalls below it."