1/ $AUD ALERT
The RBA today raised expectations it may follow the BoC & pause hikes soon despite inflation still high (but falling).
With the rate spread between AU & US one of the key determinants of the AUD & the #Fed expected to hike 3 more times, this is material...
#macro
The RBA today raised expectations it may follow the BoC & pause hikes soon despite inflation still high (but falling).
With the rate spread between AU & US one of the key determinants of the AUD & the #Fed expected to hike 3 more times, this is material...
#macro
https://twitter.com/ShaneOliverAMP/status/1632953104428843009
2/ On the back of this, we have flowed through a scenario of an AU rate pause to the HQ AUD model, with US rates still rising to 5.3%
This scenario, if it eventuates, knocks >3c off the HQ fair value target for the AUD (Dec 23) to $0.6314 vs FV $0.6680 prior to today...
This scenario, if it eventuates, knocks >3c off the HQ fair value target for the AUD (Dec 23) to $0.6314 vs FV $0.6680 prior to today...
The prior model had the #RBA hiking in lockstep with the #Fed.
It is by no means certain that an imminent pause is the outcome the RBA settles on & it has said it will be data dependent.
However, opening the door to this scenario is likely to see a probability weighted impact
It is by no means certain that an imminent pause is the outcome the RBA settles on & it has said it will be data dependent.
However, opening the door to this scenario is likely to see a probability weighted impact
on the AUD near term.
Note: there are many factors that impact the AUD model & the above examines sensitivity to the rate spread alone assuming other factors remain equal. Commodity price changes are also particularly important for the AUD fair value & can see FV shift quickly
Note: there are many factors that impact the AUD model & the above examines sensitivity to the rate spread alone assuming other factors remain equal. Commodity price changes are also particularly important for the AUD fair value & can see FV shift quickly
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