Australian Dollar: Gradual gains against US Dollar remain likely – MUFG

MUFG’s Michael Wan reports the Reserve Bank of Australia kept its policy rate at 4.35% in a unanimous decision. AUD/USD initially dipped on the statement but later rebounded as Governor Bullock reiterated hawkish inflation concerns. MUFG’s global team expects AUD/USD to move gradually above 0.70, driven mainly by risk sentiment, Fed rate cuts and a weaker Dollar.

RBA steady, currency outlook firmer

"The Reserve Bank of Australia (RBA) kept its policy rate at 4.35% yesterday in a unanimous decision."

"The AUD/USD initially dipped after the policy statement release; however it later rebounded when RBA Governor Michele Bullock reiterated hawkish statements, by warning of persistent inflation risks and stated during her press conference that future rate hikes remain on the table if inflation stays sticky."

"The RBA nonetheless remained cautious about other key external risks, such as larger or more persistent negative effects of the Middle East conflict."

"The RBA also highlighted a softer property market including through weaker wealth effects, rising interest rates, and tighter investment property tax rules as an important transmission mechanism to aid its mandate of bringing down inflation, with the RBA’s consumption forecast also seeing a downward revision by year end from 1.9% to 1.6%."

"Overall, our global team thinks that AUD/USD is likely to move gradually higher above the 0.70 levels but less so because of further rate hikes by RBA, but driven more by risk sentiment, Fed rate cuts, and a weaker Dollar moving forward."

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