MUFG see support for the AUD ahead of an RBA August rate hike (hike is not a done deal)

MUFG on the Reserve Bank of Australia and the Australian dollar. Analysts there rightly point out that Q2 inflation data next week (due July 26) is a key input for the Bank’s policy decision (due August 1):

  • a rate hike is not a done deal and a much softer CPI print could persuade the RBA to remain on hold

MUFG say that

  • The decision of the RBA to hold steady with rates on 4th July was deemed to be a ‘hawkish hold’ with the guidance indicating that further tightening ‘may be required’. This would be dependent on the incoming economic data and based on that guidance it certainly increases the prospect of a 25 bps rate hike on 1st August.

And yesterday’s employment report is the sort of data that could propmet a hike:

  • The data revealed a 32.6K increase in employment in June, more than double the market consensus, which followed a large 76.5K increase in May.
  • Given the jobs data, and given we already assumed another hike after a July pause, we see it as more likely that the RBA hikes which should help provide support for AUD over the coming weeks.

As for the CPI, we get Q2 data and June month data next week:

That 11.30 am time listed on the 26th is:

  • 0130 GMT
  • 2130 US Eastern time (on the 25th)

This article was written by Eamonn Sheridan at Source