Jun 06, 2023

The Australian dollar versus the US dollar has two big data releases ahead.

AUDUSD – Weekly Chart

AUDUSD – Weekly Chart

The price of AUDUSD has found support under 0.65 and has moved into a rectangle from the previous trading range. The forex pair now has resistance at the 0.68 level. 

The Reserve Bank of Australia will announce its latest interest rate strategy on Monday. Analysts believe a recent 8% jump in the country’s minimum wage will make another rate hike a foregone conclusion. 

Deutsche Bank Australia’s chief economist Phil O’Donaghoe expects the Reserve Bank to hike its benchmark rate by 0.25% in its June, August, and September meetings. If he is correct, it would take Australia’s cash rate to 4.6% and add another A$295 to monthly repayments on an average A$600,000 mortgage.

AUDUSD Forecast

The RBA has raised rates eleven times since May 2022, with the benchmark rate at 3.85%. At Monday’s meeting, financial markets are pricing a 55% chance of a rate hike this time. However, Deutsche Bank said a pause in the June meeting would mean another increase in July. With the squeeze on mortgage owners, the Melbourne Institute research centre said Australia’s economic gloom is at its worst since the 2008 financial crisis.

Mr. O’Donaghoe said the Friday decision to apply an 8.6% minimum wage increase on July 1 would mean higher interest rates. 

“In light of relative resilience in household spending, a stunning turnaround in the house price cycle, an unemployment rate that could move sideways for at least six more months, and a minimum wage decision that leaves material upside risks to wage growth, we now expect that the RBA cash rate will reach a terminal rate of 4.6% at the September meeting,” he said. 

Monday’s RBA interest rate decision will be followed by GDP growth on Tuesday for the Aussie economy. GDP is expected to rise by 0.3% for the quarter, 2.5% annually. That would mean a sixth consecutive quarter of economic growth but is also the slowest pace since the 2% fall in the third quarter of 2021.

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