Australian Dollar Remains Bearish After RBA Issues A 50bps Rate Hike

AUD

Market forecasts already favored a 50bps rise ahead of the announcement. Simultaneously, futures markets fully priced in a standard 25bps rise while signaling a 69 percent chance, that is, a better-than-even probability of getting double that.

The market-implied three-year policy curve has been little-changed since the RBA convened in early August. That appears to underscore the muted reaction to a seemingly well-anticipated outcome that may not materially change the markets’ outlook for the near-term policy path from here.

Traders expect that the RBA will bring the cash rate to 3 percent by the end of 2022 and continue to increase borrowing costs next year. The tightening cycle is forecast to reach about a 3.8 percent peak by the middle of 2023 and remain so until 2024.

The AUD has not been especially affected by the RBA rate announcements over the past year, with an average price change of less than 0.1 percent in the 30 minutes after decisions were announced. Notable exceptions of sizable swings between 0.5 and 0.8 percent were recorded on just 3 out of 12 occasions.

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