A slowdown in RBA rate hikes AUDUSD Rejected. But the acceleration in Australian inflation shows that the central bank has rushed to slow down. RBA should increase it. How does this affect pairs? Discuss topics and make trading plans.
Weekly Australian Dollar Fundamental Analysis
The flight of traders from the US dollar indicates that it is time for a forex correction. AUDUSD is no exception. Additionally, Australian inflation continues to accelerate. China’s GDP growth in the third quarter was 3.9%, faster than expected, but the RBA’s October plan to slow monetary tightening has been called into question.
Australian consumer prices rose 7.3% from July to September, the highest level since 1990. At that time, the RBA tightened monetary policy so aggressively that it triggered a recession. Based on past experience, Philip Lowe and his colleagues are now acting more cautiously. October saw a lower cash rate hike than investors expected, negatively impacting Australians. But that all changed after inflation accelerated in the third quarter.
Inflation dynamics in Australia, the US and the UK
Source: Bloomberg.
In fact, the RBA has no intention of aggressively raising interest rates to support Australia. Lieutenant Governor Christopher Kent said the AUD has fallen only 2% since the beginning of the year on a trade-weighted basis. The Chinese yuan occupies a sizable share of the currency basket, but its rate has been volatile lately.
Therefore, the RBA is AUSDUSD Down more than 10% since the beginning of the year. But regulators are forced to react to accelerating inflation. According to its forecasts, consumer prices will hit a high of 8% in December, but judging by current dynamics, the upper bound will be even higher. This forced the RBA to change strategy and pick up speed after an announced slowdown in early October. Bloomberg economists expect him to hit a maximum cash rate of 3.5%, while futures market forecasts put him even higher at 4.2% by July.
Since May, Australian regulators have raised interest rates by 250 bps to 2.6%. Derivatives are now forecasting another 50 bps gain at the next meeting scheduled for November 1st.
Markets therefore believe the RBA will be forced to accelerate monetary tightening instead of delaying it. This situation, combined with an improvement in global risk appetite and a sell-off of the US dollar across assets, has allowed the AUDUSD bull to push the rate to his three-week high.
every week AUDUSD trading plan
Clearly, US dollar long trades are overstretched and ending them will lead to a correction. think. After all, in this case, the financial situation is improving, and the fight against inflation will become more difficult. The hawkish Fed AUDUSD You can switch from short-term buying to medium-term selling when it goes down and the price bounces off the 0.655 and 0.664 resistances.
AUDUSD price chart in real time mode
The content of this article reflects the opinions of the author and does not necessarily reflect the official views of Right Finance. The material on this page is provided for informational purposes only and should not be considered as providing investment advice for the purposes of Directive 2004/39/EC.
