AUD/USD: Looming prospect of RBA rate hikes to support the aussie in the coming months – MUFG

The minutes of the Reserve Bank of Australia (RBA) signaled that the first rate hike may not be too far off, as they expect inflation to further increase above target. This should keep the Australian dollar well bid in the coming months, economists at MUFG Bank report.

RBA rate hikes in focus

“The release of the latest RBA policy minutes further highlighted that the RBA is moving close to raising rates providing additional support for the Australian dollar. The minutes highlighted that stronger core inflation in Q1 and wage growth had prompted the RBA to bring forward the timing of the first rate increase.”

“Australian rate market participants have priced in around 11bps of hikes by the next RBA meeting on 3rd May and 33bps of hikes by the following 7th June meeting. The looming prospect of RBA rate hikes should continue to keep the Aussie well bid in the coming months.”