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Apr 27 - 10:55 PM

AUD/USD - COMMENT-AUD/USD To Be Driven By Global Growth Outlook Not RBA

By John Noonan  —  Apr 27 - 09:15 PM

Red-hot inflation has brought forward expectations of the first rate hike by the Reserve Bank of Australia from June to May nL2N2WP03K.
Normally this would be a catalyst for a strengthening AUD, but with investors focused on global growth, the impact may be marginal nL5N2WO3LM.

The AUD has outperformed other major currencies for much of 2022 as investors seek inflation hedges.
Prices in key Australian commodities such as natural gas and iron ore have soared and risk currencies such as AUD have benefited from large outflows from low yielding assets such as bonds and JPY.

The focus now shifts to global growth prospects, where pessimism has increased markedly in recent weeks and heavily weighed on the AUD.
Fears the Federal Reserve will severely slow the U.S. economy with jumbo rate hikes to get ahead of inflation, combined with concerns China's zero COVID tolerance will hit growth, have dampened the global outlooknL2N2WP09P.

Both the Fed and RBA meet next week and there is a good chance the market reaction to the Fed's expected 50 basis pip hike will have a more lasting impact on the direction of the AUD/USD than the RBA decision - where the market pricing in a 15 basis pip hike.

The AUD/USD is trending lower with the objective of the move at the 2022 low at 0.6967.
Selling rallies with a stop-loss above the 200-day moving average at 0.7290 is the favoured strategy while global growth remains in focus.
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Source:
Refinitiv IFR Research/Market Commentary

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