AUD/USD: RBA hike fails to lift Australian Dollar – ING

ING’s Francesco Pesole reports the Reserve Bank of Australia (RBA) raised rates to 4.60% as expected, but AUD/USD fell below 0.700 as Governor Michele Bullock revealed policymakers had considered holding rates due to housing and global risks. ING still targets AUD/USD at 0.720 in December, contingent on a softer Dollar and easier global liquidity, but acknowledges increased near-term downside risks.

RBA hike overshadowed by dovish signals

"The Reserve Bank of Australia hiked rates as expected to 4.60% this morning. AUD’s first reaction was quite muted. The statement retained a hawkish stance, signalling upside risks to inflation and openness to hike again if needed."

"However, the press conference is adding a dovish taint and AUD has come under pressure, breaking below 0.700. Governor Michele Bullock said policymakers considered holding rates today, given risks to the housing market and a potentially slower global economy due to the Middle East conflict."

"Our call for AUD/USD at 0.720 in December has always relied heavily on the USD softening into year-end and easing global liquidity conditions. AUD’s fundamentals remain solid, and this hike supports them further, so we remain confident that in that USD-bearish scenario into year-end, AUD would be an outperformer."

"But clearly, global conditions have worsened, and near-term downside risks have increased for AUD/USD."

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