RBA: AUD strength could delay rate hike - ING

Sandeep Kanihama FXStreet Contributor

After some fairly disappointing data on consumer spending and wages at the end of 2017, the most recent Australian data has shown a marked improvement, notes the research team at ING.

Key Quotes

“What has looked like a faltering household sector came blistering back, with fantastic retail sales growth for November (published January 2018) and strong autos growth, too. Consumer confidence has also shifted higher, and the labour market data firmed more than had been expected.”

“Yields on shorter-dated Australian government debt have picked up, though this could simply reflect moves in the US 2Y Treasury rather than hint at any imminent RBA tightening. Indeed, recent RBA commentary has made a big deal of unwarranted AUD strength, and with the AUD/USD pushing back up through 0.80, we believe the RBA will be happy to leave the cash rate on hold at 1.5% at their 6 Feb meeting. Even the Australian housing market has shown some signs of calming down, in a measured fashion, which will provide some solace to those who believe the RBA has left rates too low, for too long, and has contributed to a debt-fuelled housing bubble (not our view incidentally).”

“Our house view is for only one rate hike in 2018 in the second quarter. Though recent AUD strength and RBA comments suggest we ought to push this back at least to 3Q18.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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