AUDUSD to ease below 0.69 again if RBA were to disappoint market expectations – Commerzbank

A  speech by Reserve Bank of Australia (RBA) Central Bank Governor Philip Lowe indicated that the central bank is rather evaluating going by 25 bps or 50 bps at the coming meeting. In case the RBA fails to deliver a 50bps rate hike, the AUD/USD could drop below 0.69 once again, economists at Commerzbank report.

Aggressive market expectations do not support AUD

“According to Central Bank Governor Lowe, the RBA will discuss at the next meeting whether it will raise by 25 or 50 basis points. This takes a 75 bps move in July off the table, but another 50 bps is a possible.” 

“The market is now pricing in a very tight RBA rate cycle, expecting a key rate of 3,5-4% by the end of the year. As the market was very nervous and risk averse last week these restrictive expectations were unable to support AUD. The collapse of the iron ore prices is also putting pressure on AUD, moreover, there are concerns about the Chinese economy as a result of the covid measures there.”

“The environment for AUD remains difficult. If the RBA were to disappoint market expectations, which are already quite aggressive, next week and not deliver a 50 bps rate step, AUD/USD might ease below the 0.69 mark again.”