AUD/USD: Higher on RBA hawkish tone and housing data – BNY

BNY’s Head of Markets Macro Strategy Bob Savage notes that the Australian Dollar is trading above 0.71, its highest level since February 2023, as markets price a roughly 70% chance of another 25 bp RBA hike in May. Savage also notes strong first-home-buyer and investor loan growth, with rising average loan sizes, underscoring robust domestic housing demand.

RBA stance and credit expansion

"Rate expectations: RBA Deputy Governor Andrew Hauser has said inflation is too high and policymakers are committed to doing whatever is necessary to contain it. AUD is trading above 0.71, the highest level since February 2023, while the odds of another 25bp hike have moved to 70% for May."

"RBA Deputy Governor Andrew Hauser has said Australia’s central bank should not criticize government spending decisions. He argued that unelected officials should not attack elected fiscal choices and that a dollar of public demand should be treated the same as private demand in assessing inflation."

"Speaking in Sydney, he said the RBA had lifted rates in February because global growth proved stronger than expected, financial conditions were less restrictive than assumed and private demand rose relative to supply. Hauser added that the RBA’s strategy of keeping the economy close to balance may have left Australia more sensitive to demand shocks, raising the question of whether the country is relatively more inflation-prone as recent price pressures re-emerge."

"In Australia, the number of first-home-buyer loan commitments rose 6.8% q/q to 31,783 in the December quarter. This was the largest increase since the equivalent quarter of 2023, and the y/y increase was 9.1%. The value of these loans increased by 15.5% q/q, while the average first-home-buyer loan size climbed a record 8.5% to $607,624, largely driven by New South Wales."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)