Some of the AUD’s focus will shift back to the RBA this week, but overall risk sentiment and expectations about Fed rate hikes will continue to dominate its trend.
It will be the first meeting of the RBA Board under Governor, Philip Lowe, and Deputy Governor, Guy Debelle. But these are the only changes we expect, so we expect the meeting to be neutral for the AUD.
The RBA will likely keep rates on hold and continue to indicate a neutral policy bias while forecasting inflation to remain low for ‘some time’, which means it could cut rates if it needed to thought. The RBA will also likely continue to speak softly about the currency. Lowe recently said that the RBA are not “inflation nutters” and the newly signed Statement on the Conduct of Monetary Policy emphasized the flexible nature of the 2-3% inflation target and that it should be pursued in the context of financial stability.
So the RBA is not likely to go slashing rates in a rush to get inflation (currently running at 1.5% YoY in underlying terms) back into the target band. And while the RBA will continue to say that its indicators show that the housing market is cooling, it will remain wary of re-stoking the flames underneath the market by cutting rates further.
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