Synopsis:

ANZ anticipates no changes to the cash rate at the upcoming RBA meeting and discusses potential near-term downside for AUD/USD, especially if the RBA adopts a more dovish stance.

Key Points:

1. RBA Rate Decision:

   • Expectations: ANZ expects the RBA to keep the cash rate unchanged at the August meeting.
   • Q2 CPI Report: The lack of a clear signal from the Q2 CPI report supports the view that the RBA is finished with hiking rates.

2. Future Rate Cuts:

   • Forecast: ANZ forecasts rate cuts to commence in February 2025.

3. Impact on AUD:

   • AUD/NZD Dynamics: The Q2 CPI print removes the remaining tailwinds for more RBA hawkishness, reducing momentum for AUD against the NZD in the near term.

4. Investor Flows and Market Reaction:

   • AUD/USD Spot Flows: ANZ-observed data indicates a sharp decrease in net buying among investors, dropping from around 60% to 49% at its lowest. However, net buying has rebounded as AUD/USD has stabilized.
   • Potential Downside: Ahead of the RBA meeting, there may be short-term downside for AUD/USD, particularly if the RBA appears more dovish than expected.

Conclusion:

ANZ expects the RBA to maintain the cash rate at the upcoming meeting, with the Q2 CPI report reinforcing this outlook. They predict rate cuts to start in February 2025. The recent stabilization of AUD/USD may face near-term downside, especially if the RBA signals a more dovish stance than the market expects.