AUD Strengths Outweigh Pause Risks Amid Steady Economic Data

Australia's Reserve Bank is likely to pause interest rate hikes despite upcoming economic data, according to Brown Brothers Harriman. The bank sees a risk of an extended pause due to already restrictive policy. However, Australia's attractive carry and commodity exposure remain key tailwinds for the Australian Dollar.

The Q2 wage price index and July labor force survey are expected to show steady results. Wages are forecast to rise 0.8% quarter-over-quarter for a third straight quarter, while the economy is predicted to add 12,000 jobs compared to 76,300 in June. The unemployment rate is seen unchanged at 4.4% for a third consecutive month.

RBA cash rate futures imply 60% odds of one final 25 basis point hike by year-end to 4.6%. Elias Haddad from Brown Brothers Harriman believes the risk is skewed towards a more extended pause in the RBA tightening cycle due to policy being already somewhat restrictive.