This Week: AUD Awaits RBA’s Potentially Final Rate Hike

After a tumultuous week of central banks meetings and blockbuster economic data, including last Friday’s shocking US jobs report, the risk calendar looks relatively light in comparison this week:

Monday, February 6

  • AUD: Australia January inflation, 4Q retail sales
  • EUR: Germany January inflation, December factory orders; Eurozone December retail sales

Tuesday, February 7

  • AUD: Reserve Bank of Australia rate decision
  • EUR: Germany December industrial production
  • USD: Fed Chair Jerome Powell interview
  • US President Joe Biden delivers State of the Union address

Wednesday, February 8

  • USD: New York Fed President John Williams speech
  • Earnings by Disney, Uber

Thursday, February 9

  • SEK: Sweden rate decision
  • GBP: BOE Governor Andrew Bailey speech
  • USD: US weekly initial jobless claims
  • Pepsico quarterly earnings

Friday, February 10

  • JPY: Japan January PPI
  • CNH: China January CPI and PPI
  • AUD: RBA releases updated quarterly economic forecasts and policy outlook
  • GBP: UK December/4Q GDP, industrial production; BOE Chief Economist Huw Pill speech
  • USD: US February consumer sentiment
  • CAD: Canada January unemployment

The Reserve Bank of Australia’s policy meeting on Tuesday is expected to see another 25bps hike which takes the benchmark cash rate to 3.35%.

The Australian central bank has already lifted rates at each of its monthly meetings, including four 50bp hikes from June to September.

The RBA then slowed the pace of tightening in October and pivoted to 25bp hikes with policy arguably already in contractionary territory.

This has fuelled some expectations that Tuesday’s hike might be the RBA’s last in this cycle.

But the recent inflation data showed that:

  • underlying CPI had risen to 6.9% in 4Q compared to the previous quarter’s print of 6.5%.
  • just this morning, we learned that Australia’s January inflation rose by 6.4% year-on-year, compared to December’s 5.9% year-on-year print.
  • on a month-on-month basis, January’s inflation measure rose by 0.9% (versus December 2022) compared to December’s 0.2% advance from November.

This is clearly going the wrong way for policymakers and more work needs to be done.

Looking ahead, forward-looking indicators are softening with house prices continuing to cool and the full impact of the RBA’s rate hikes still to be felt.

The AUD made new cycle highs last week at 0.71577 versus the US dollar but the major plunged after the blockbuster US employment report.

Prices have dipped below last week’s low at 0.69838 and is now testing support around the 50% Fibonacci level from 2022’s peak-to-trough price action.

Further south, AUDUSD’s 50-day simple moving average (SMA) may offer stronger support if either the Australian dollar weakens further or the US dollar climbs higher.

However, if the RBA can reassert its hawkishness, that may pull AUDUSD closer to its 21-day SMA and possibly even back above the psychologically-important 0.700 line.

AUD awaits what could be RBA's final hike

More By This Author:

Brent Falters Back Below 50-Day SMA
S&P 500 Set To React To Tech Titans Thursday
3 Factors That Could Trigger Bitcoin’s Next Big Move

Disclaimer: Forecasts which are made in the review constitute the personal view of the author. Commentaries made do not constitute trade recommendations or guidance for working on financial ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.