Economic News

What’s next for AUD/USD

What’s next for AUD/USD

RBA board meeting will take place next week and an increase in Cash rate is expected, How much ? It’s a question. RBA discussion in June brought a hawkish element to the RBA’s monetary policy, noting that the current level of the cash rate is well below the estimated neutral rate, thought to be at least 2.5%. The neutral real interest rate is the real interest rate that is neither stimulatory nor contractionary.

Based on the RBA’s forecasts for inflation to rise to around 7 percent and for the unemployment rate to decline further in the months ahead, the RBA needs to continue tightening interest rates past the neutral rate to fulfil its pledge that the Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.

RBA is expected to increase 50bps for the forth time which will take the cash rate to 2.35%. This will be followed by a 25bps rate hike in October or November, taking the cash rate to 2.60% and into the mildly restrictive territory before year-end.

The AUD/USD has fallen almost 3.5% over the past week, hit by the perfect storm of a hawkish Fed Chair at Jackson hole, renewed lockdowns in China and weaker metals and energy prices. Easily running over AUDUSD dividend repatriation demand from big Australian miners.