Last week the boffins at Martin Place held tight on its series of rate rises, which have surprisingly had almost no effect on the short term course of the Australian dollar versus USD:
Still holding steady at just below the 67 cent handle, Westpac calls this price action “encouraging” but the longer term pain for importers remains. In a recent note, Westpac said that ” price action around the RBA’s steady hand on the cash rate at 4.1% was encouraging for the Aussie, its initial dip fully unwound within hours” and admitted they were leaning towards a hike.
They continue to suggest “(a) 4.6% cash rate peak we had been expecting, but the most likely path now appears to be 25bp hikes in August and September. Markets are pricing around 65-70% chance of an August move.”
Has this been enough to keep the Aussie elevated against USD or is it just short term volatility around an unexpectedly low US jobs report and uncertainty regarding the Fed’s fight against inflation. Against the crosses, the Australian dollar remains well under the pump, with Yen returning to favour:
Pound Sterling still strong at yearly highs:
And importantly Euro ratcheting higher as the ECB remains on the rate hike path higher as well:
Don’t confuse a week or two of short term shoring up of the Aussie as a permanent floor, even if the RBA’s hand is forced come August.