The Reserve Bank of Australia (RBA) published the minutes of its 18 June policy meeting last night that confirmed that board ultimately saw the case for a hold, ING’s FX strategist Francesco Pesole notes.
“RBA published the minutes of its 18 June policy meeting last night. It was confirmed that board discussed raising rates but ultimately saw the case for a hold as the “stronger one”, although it is not ruling anything in or out in terms of future policy moves.”
“Remember that the meeting was followed by a major inflation surprise in the May read, which rose from 3.6% to 4.0% year-on-year. There is a non-negligible risk the RBA will raise rates again (around 50% priced in by November), and the second quarter CPI report on 31 July will be a make-or-break event. Another inflation surprise and a rate hike will be a very tangible possibility.”
"That possibility is keeping us confident that the Australian Dollar (AUD) will have a strong summer. As we see US macro data endorsing rising dovish bets in the US, we think high-beta currencies can do well and markets will reward especially those that can count on hawkish domestic central banks. A move to 0.68 in AUD/USD remains our base case."