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RBA seen holding rates, but AUD faces pressure on hawkish risk

Commerzbank expects the RBA to keep the cash rate unchanged, with only about a 60.0% chance of another hike by year end, limiting AUD support until markets price a potential cut.

Reported · Written up by our desk · Central Banks

FXStreet, citing Commerzbank analyst Volkmar Baur, says the Reserve Bank of Australia is expected to keep the cash target rate unchanged at its upcoming meeting, consistent with market pricing. Baur also notes that while no surveyed analyst expects a rate change, the RBA could still deliver a slightly hawkish tone. The argument is that persistently high petroleum product prices may make it harder for policymakers to sound dovish, even as expectations for hikes have already been scaled back.

The Commerzbank view points to a contrast in recent data trends, with inflation surprising lower twice since the prior meeting, while the labor market has remained robust. Baur adds that commentary on the housing market could also influence the tone.

Looking ahead, Baur says the medium term bias remains toward a rate cut, and that the Australian dollar could stay under pressure until markets fully price that outlook, FXStreet reported. He also highlights that by year end the market sees only a 60.0% chance of another rate hike, after having expected nearly two hikes by the end of April.

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