Nov 07, 2023

The AUDUSD exchange rate has a central bank decision from Australia’s RBA ahead of Tuesday’s session.

audusd chart

AUDUSD – Daily Chart

The price of AUDUSD trades around the 0.65 level and will look for the RBA to push it toward higher levels. Support is back down at 0.63 if the market takes a bearish tone. 

The International Monetary Fund has recommended further monetary tightening by the Reserve Bank of Australia to get Australia’s inflation back to target by 2025 

The IMF’s latest assessment, released on Wednesday, said that although inflation was declining in the country, it “remains too high”, with the rising costs of services remaining “sticky” after 12 interest rate rises by the RBA. 

The Washington-based group recommended “further monetary policy tightening” through higher interest rates to ensure inflation returns to the target range by 2025 “and minimise the risk of de-anchoring inflation expectations”. 

Abdoul Wane, IMF mission chief, did not say how much higher the RBA’s primary interest rate, currently at 4.1%, would have to rise. The size of the hikes would “depend on the psychological effects of rate hikes that our models will not capture”. 

Analysts at Aussie banks NAB and Westpac expect a 25% rate hike this time, alongside US investment bank Morgan Stanley. A poll of economists surveyed by Reuters also saw a majority calling for a 25 bps hike, with 34 of 39 questioned being hawkish. 

Property prices are still elevated, even when more Australians live under one roof than ever before, called the person-to-house ratio. While loan approvals for property investors increase, alongside higher migration, first-time buyers remain suppressed. This is partly due to Chinese investors leading a post-lockdown boom in Australian property, according to the Financial Review. 

The Reserve Bank lifted rates from 0.1% in May last year to 4.1%. Only then, there had been an increase since late 2010. The Finance Brokers Association said of a hike: 

“I understand the need for the RBA to do what they feel is best for the nation economically, but surely as a society we also have to consider the human cost”.

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