Aussie Jumps on RBA Rate Hike
RBA Hikes Rates
The Aussie Dollar is trading a little higher today on the back of the latest RBA rate-hike overnight. The bank raised rates to 4.10% from 3.85% prior, in line with expectations on the back of the recent uptick in inflation. Core CPI rose to 3.4% last month, well above the bank’s target band of 2%-3%, fuelling a firm shift in trader’s rate projections for the RBA this year.
Hawkish Expectations
The tone of the meeting was broadly hawkish, cementing expectations of further tightening to come and AUD was well-bid accordingly. There was some surprise initially as the vote split showed a majority of just 1 member for the hike. However, speaking in the post-meeting press-conference, RBA governor Bullock explained that this was mainly due to a timing debate about whether the bank should hike now or wait until next meeting.
Iran War & Fed
Concerns around the impact of the Iran war were also shared. On the back of the meeting, however, projections for further tightening in May have risen to around 40% form around 25% prior. While this narrative remains, AUD looks poised for further upside near-term, particularly while inflationary risks linked to the Iran war persist. Looking ahead this week, tomorrow’s FOMC meeting might cap the rally for now, however, if we see a fresh USD rally in response to any firm hawkishness from the Fed.
Technical Views
AUDUSD
For now, the pair remains capped by the bull channel highs and the .7153 resistance level. We saw strong bearish divergence in momentum studies into the last push higher, suggesting possible reversal risks. Near-term, .6942 remains the key floor for bulls to defend to keep the focus on further upside and a test of the .7285 level next.
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