The Reserve Bank of Australia remains committed to keeping the cash rate target lower for longer, but the market is not convinced that will be the case. With Australian bond yields holding at elevated levels, the AUD/USD is trading at the upper end of its recent range.
The RBA's Click here released Tuesday reiterated the board "remained committed to maintaining highly supportive monetary conditions to achieve a return to full employment in Australia and inflation consistent with the target." The bank again added that they don't see those conditions being met before 2024.
The RBA has shown increasing concern over the risks associated with any sudden fall in property prices at a time when jobs are being lost and wages are falling; Click here .
Global bond markets are becoming increasingly convinced that inflation pressures aren't transitory and major central banks will be forced to tighten policy sooner than they plan to.
Refinitiv's RBAWATCHshows the market starting to price in a 25-basis-point hike to the 0.10% cash rate in the third quarter of next year and a second quarter-point hike by the start of 2023.
The AUD/USD will likely continue trending higher while the markets doubt the RBA's base-case scenario.
A clear break above resistance at 0.7440 targets the Sept 3 trend high at 0.7477.
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