AUD Loses Momentum as Market Expects Too Much from RBA

Commerzbank's Volkmar Baur believes market expectations for further Reserve Bank of Australia (RBA) rate hikes are excessive in light of softer August CPI data. The inflation reading showed that prices remain above target, but with a lag due to past tightening and weakness in the real estate sector.

The Australian Dollar is unlikely to gain additional support as the RBA is likely to wait before making further decisions, according to Baur. He notes that interest rate hikes take time to have an effect, particularly on the real estate market, where building permits fell by 6.1% in August and prices continue to decline.

Baur points out that inflation will take a while to return to the middle of the target range, but argues that waiting is the best course of action for the RBA.