Aussie Rallies Following Comments

The Aussie Dollar is trading firmly higher today on the back of comments from the RBA governor this morning. Bullock warned that the RBA won’t refrain from hiking rates again if needed. Her comments come just days after the RBA held rates unchanged at the August policy meeting which also saw the bank raising its growth and inflation forecasts over the measured horizon. Bullock warned of the threat from persistently high inflation and the need to keep applying pressure in order to drive CPI back to target. Indeed, Bullock noted today that the bank had deep discussions around whether to hike rates this month given the backdrop.

RBA Divergence

The RBA governor’s comments were decidedly hawkish. At a time when most other G10 central banks are either easing or close to easing, this creates very tradeable divergence between AUD and other G10 FX. Indeed, with easing expectations ramping up in the US and the prospect of a further period of USD weakness ahead, there is plenty of room for AUDUSD to ally near-term.

Easing Possible, But Unlikely

Looking ahead, Bullock made sure to caveat her guidance, saying that if the situation changes the bank will be just as ready to ease rates as needed. However, she cautioned that given the jobs and inflation backdrop currently, she cannot currently foresee what would allow the RBA to cut rates near-term.

Technical Views

AUDUSD

The sell off in the Aussie found strong support into the .64 level with price since turning sharply higher and now back above .6520. While above here and with momentum studies bullish, focus is on a continuation higher towards the .6681 level next.