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Jun 01 - 06:55 PM

AUD: A Full 25bps Hike By The RBA Next Week Is Priced In; Short AUD/CAD Attractive - Credit Suisse

By eFXdata  —  Jun 01 - 03:00 PM

Credit Suisse discusses its expectation for next week RBA June policy meeting. 

"Ahead of the RBA meeting scheduled on 7 Jun, a full 25bps hike is priced in, with markets pricing in low odds (20%) of a 50bps hike. While we suspect smaller 25bps increment hikes may underwhelm market players that are more focused on other central banks discussing 50bps hikes, this pricing belies the fact that the RBA meets another 7 times this year, giving them several opportunities to tweak rates.

If the RBA’s decision to surprise hawkish in the May meeting is assumed to set a precedent, risks going into next week’s meeting likely skew in favour of a second larger-than-expected rate hike. That being said, we continue to view the RBA as a central bank that will struggle to deliver on longer-term market expectations," CS notes. 

"If the RBA delivers a larger than expected rate hike, it is likely that markets trim hiking expectations out of later years. In this case, 40bps seems like the most likely increment, as it would take RBA rates to a more “traditional” number of 0.75%, from 0.35% currently. We still target 0.6900 in AUDUSD, but also like expressing AUD shorts against CAD," CS adds. 

Credit Suisse Research/Market Commentary


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