By Justin McQueen

Aug 26 (Reuters) - Australian monthly inflation data came in hotter than expected, forcing a hawkish repricing in AU rates and prompting local banks to pencil in another RBA hike by year-end. AUD firmer as a result, but as flagged previously, the cleaner expression remains via the crosses, in particular, AUD/NZD, which looks to have established a floor around 1.1900.

Markets are now pricing around 20bps of tightening by the November RBA meeting, up from around 11bps pre-CPI. Note that November is the next scheduled decision where the RBA updates its forecasts, and policymakers will also have the Q3 inflation figures – due October 28 – in hand to validate another move.

With RBA hike odds growing and the bar for a dovish NZ repricing low, especially given the event risk ahead - most notably the NZ general election scheduled for November 7 - AUD/NZD has room to retest 1.2200 and beyond, potentially hitting a fresh year-to-date high. Thus, the cross remains the preferred avenue for AUD strength, given that it also sidesteps the USD noise.
rba PRICING SHIFT


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))