AUD Carry Remains Solid Despite Rising Pause Risks
Australian Dollar (AUD) carry remains solid despite growing risks of an extended pause in Reserve Bank of Australia (RBA) rate hikes. According to Brown Brothers Harriman's Elias Haddad, upcoming wage and labour data are unlikely to shift RBA pricing.
The Q2 wage price index is expected to rise 0.8% q/q for a third straight quarter, but dip to 3.2% y/y vs. 3.3% in Q1. The July labor force survey will also reveal an economy forecast to add +12k jobs, down from the +76.3k added in June.
RBA cash rate futures imply 60% odds of one final 25bps hike by year end to 4.60%. However, Haddad sees risks skewed towards a more extended pause due to already restrictive policy.
Australia's attractive carry and strategic exposure to commodities linked to energy, AI, and defense remain key AUD tailwinds.