AUD/USD: RBA's hawkish turn may not prove enough to materially lift the aussie – ING

The Reserve Bank of Australia (RBA) has hiked rates by 25bp taking the cash rate target to 0.35%. The aussie jumped after the statement. However, economists at ING expect AUD/USD to struggle at the 0.72/73 zone in the coming weeks.

RBA hikes 25bp

“The RBA sent a firmly hawkish signal as it hiked rates by 25bp (to 0.35%) and announced it would stop reinvesting maturing assets, therefore allowing its balance sheet to shrink over the coming quarters.”

The AUD rally has proven relatively short-lived, which is not entirely surprising given that: a) markets were already pricing in a cash rate of 2.60% by year-end (they now expect 2.80% after the hike); b) lingering concerns on China’s Covid crisis are weighing on the Antipodeans. 

“The upside for AUD/USD may still be limited to the 0.72/0.73 area in the coming weeks.”