Central Banks


The RBA is certainly liking the idea of not playing it straight now, do they? The expectation coming into the decision was either for a 25 bps move or a 40 bps move, but here they are delivering a 50 bps move instead.

RBA cash rate futures showed a pricing of just over 25 bps (0.56%) so the aussie is gaining strongly on the back of the decision. AUD/USD is up 0.6% to 0.7245 as the RBA doesn’t disappoint the hawks.

That could invite a more aggressive push towards hiking in the months ahead and will be a tailwind for the aussie, despite a lot of rate hikes already priced into the front-end of the curve. Cash rate futures show that markets are expecting a push towards 3% by February next year.

They are laying down the hammer that there will be more rate hikes coming and it mainly boils down to the size of the increases at this stage. For now, there isn’t anything to suggest that the RBA will step back from that and the language reaffirms that.

The only thing that may cap aussie gains today will be the more sluggish risk sentiment with equities pinned lower.



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