RBA Governor Lowe in his speech yesterday said there “were now clearly scenarios where rates could rise”, a decided shift from his previous stance that a move was unlikely in 2022, but still incredibly dovish compared to well, the world. Despite the lack of interest (sic) in interest rate futures – now suggesting the first hike to come in June, with up to 1% total by the end of the year – the Australian dollar continues to appreciate versus the USD:
A small reprieve overnight as other risk currencies played catchup, notably Pound Sterling, but the short term trend is not yet over post the RBA February meeting. The longer term chart still spells doom for the Pacific Peso when you look through the usual monthly volatility:
This may well be just an antipodean paired trade as the Kiwi is on an almost identical path, even though its central bank is much more hawkish. The recent NZ jobs report put unemployment falling to an all-time low of 3.2% while wage growth firmed to a 12-year high of 2.8%, which sent a rocket under Kiwi:
At least in the short term as it too is suffering from the King Dollar surge.
Interestingly, while interest rate markets are forecasting no less than seven rate rises from the RBNZ this year, the AUDNZD cross remains on a tear with the Aussie outperforming above the 1.07 level and wanting to return to the secular downtrend line at the 1.09 handle:
Watch for this cross to potentially move lower as the Fed starts shooting in March while the RBA ducks for cover.