RBA Patience Trims Hike Expectations, Weighing on Aussie Dollar
RBA Governor Michele Bullock's recent comments have sparked concerns about an extended pause in interest rate hikes. According to Brown Brothers Harriman, this has weighed on the Australian Dollar (AUD), with AUD/USD edging towards key support at 0.6904, the 200-day moving average.
Bullock balanced a hawkish bias with a message of patience, noting easing domestic demand and labour conditions. The RBA cash rate futures have cut August hike odds from about 30% to 20%, indicating that investors are now less confident in a rate increase.
BBH's Elias Haddad believes the risk is skewed towards an extended pause in the RBA tightening cycle, which would be a headwind for AUD. The RBA projects real GDP growth to be below potential over the next two years, and the current cash rate of 4.35% sits near the top of the range of model-based central estimates of the nominal neutral rate.