The Reserve Bank of Australia made the expected decision to keep rates on hold this morning, with a strong focus on inflation. ING’s FX strategist Francesco Pesole highlights the hawkish stance taken by the central bank.
Potential for AUD/USD to Reach 0.67+ Before the US Election
The RBA’s latest statement indicates that core inflation is projected to remain above 3% for most of next year, only reaching the 2.5% target in 2026. Governor Michele Bullock emphasized that a rate cut in the next six months is not in line with the board’s thinking, pushing back against market expectations. The central bank also stressed its independence from external easing pressures.
Despite concerns about dovish market pricing and a strong rally in AUD bonds, the Australian dollar is performing well against G10 currencies. While a strengthening USD may temporarily limit an AUD/USD rally, Bullock’s hawkish tone is expected to pave the way for further gains once equity market volatility subsides. There is a possibility of the AUD/USD returning to 0.67 or higher before the US election.
Analysis: How RBA’s Decision Impacts Your Finances
The RBA’s decision to hold rates reflects its confidence in the economy’s resilience amid high inflation. For investors, this signals stability in the short term, with the potential for the Australian dollar to strengthen against its peers. However, uncertainties surrounding the US election and global economic conditions could introduce volatility in the currency markets.
If you have investments or financial assets tied to the Australian dollar or global currencies, staying informed about central bank policies and economic indicators is crucial. Consider diversifying your portfolio to mitigate risks associated with currency fluctuations and market uncertainties. Keep a close watch on developments in the FX market to make informed decisions and protect your financial interests.