AUD Fades Ahead of RBA Decision

Reserve Bank Of Australia

S&P Global Market Intelligence says that firms are more concerned by persistently high inflation in their business in the fourth quarter of 2022. Retail sales data for July met expectations as it increased from the previous release.

The delay and extension did nothing to the Australian Dollar price appreciation. The market anticipates tomorrow’s Reserve Bank of Australia (RBA) rate decision as it looks like it might result in a 50bps increase. This is because money markets currently price this in with a 67% probability in attempts to quell inflation.

Looking forward to October, the incremental increase shows a potentially less aggressive RBA while the recessionary fears grip global markets and the ‘pro-growth’ AUD.

This being said, the message of the Federal Reserve has been pressuring other central banks to maintain higher than desired interest rate hikes. If there is a 50bps rate hike tomorrow, the Australian Dollar may find some temporary support, but the continuous fading fundamental backdrop for Australia leaves future guidance skewed towards the USD.

The Chinese economy shows no improvement while the US dollar continues to dominate.

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