AUD/USD, AUD/NZD flows - modest sell fact extension out of RBA, CPI in focus
RBA hikes as expected remains ready to do as needed in terms of further tightening
Modest sell the fact for AUD, extending the pre-meeting tone
CPI data the next big focus and to remain the key data release going forward
Main focus overnight was the RBA that delivered the expected hike, noting that some inflation risks had materialised and retaining a tightening bias suggesting: ‘The Board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed’.
Bullock struck a more balanced note though. While suggesting inflation to last longer than expected, added that financial conditions are restrictive and that if inflation comes down possible no more hikes needed. Also, a case for holding rates discussed today.
Markets prior had one further hike priced in and then a further one hedged anyway , so it’s proved a ‘sell the fact’ for the AUD - initial bounce sold back to new lows of 0.6975~ on extension of the recent trend. AUD/NZD also extending the drop back from the near-1.25 tops towards 1.23 (1.2345 lows to date)
Aug CPI data is out on Wednesday and will remain the key data release going forward with the RBA putting all the focus on the extent and breadth of ongoing inflation risks – consensus is for 4.1% from 3.5% headline and 0.3%m/m, unchanged at 3.6%y/y on the trimmed mean.