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Australian Dollar lags as BBH flags softer wage data for an RBA pause
RBA cash rate futures still price about a 60.0% chance of one final 25 bps hike by year end, but BBH says the odds favor an extended pause.
Brown Brothers Harriman analyst Elias Haddad said the Australian dollar is underperforming as Australian bond yields fall following Q2 wage growth that matched expectations. In his view, the wage backdrop will keep the Reserve Bank of Australia on hold, despite support from carry and commodity exposure.
Haddad pointed to Q2 wage growth of 0.8% quarter over quarter for a third straight quarter, taking annual wage growth to 3.2% year over year. He added that private sector wage gains eased to a four-year low of 3.1% year over year, while public sector pay growth stayed at 3.4% year over year for a second consecutive quarter.
He said the RBA cash rate futures complex continues to imply roughly 60.0% odds of one more 25 bps hike by year end to 4.60%. Even so, Haddad argued the risk is skewed toward a longer pause because policy is already somewhat restrictive.