BTMU FX Strategy Research notes that the AUD has been the clear outperformer overnight resulting in the AUD/USD rate rising to its highest level since May 2015, boosted by the release of the more hawkish than expected RBA minutes from their policy meeting on the 4th July.
“There was no clear signal in the minutes that the RBA is considering raising rates in the near-term. However, the minutes did also include an important discussion over the neutral interest rate in Australia. The RBA estimates that the neutral real and nominal interest rates are at 1.00% and 3.50% respectively,” BTMU adds.
“In light of still subdued inflation and recent weak economic growth, we still believe that the RBA is likely to wait until next year to begin raising interest rates.
A shift to tighter RBA monetary policy will encourage a stronger Aussie although the market could be getting ahead of itself in the near-term over the likely timing of the first hike,” BTMU argues.
BTMU targets AUD/USD at 0.77 by year-end.
Source: BTMU Research
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