AUD/USD: Aussie bulls may need to be patient – CIBC
12.05.2022, 15:40

AUD/USD: Aussie bulls may need to be patient – CIBC

Analysts at CIBC forecast the AUD/USD pair at 0.72 by the end of the second quarter, and at 0.75 by the third quarter. They see the Reserve Bank of Australia rising at least another 150bps of tightening by year-end.

Key Quotes: 

“The RBA has moved to suggest it is “committed to doing what is necessary to ensure that inflation in Australia returns to target over time. ” The switch to policy front loading is partly a function of the substantive uptick in the inflation profile contained in the Statement on Monetary Policy.”

“As prices are now expected to reach 6% by year-end, the bank deemed it necessary to act aggressively. The central bank has become increasingly wary of inflation expectations becoming de-anchored.”

“Beyond the expected uptick in headline prices, the continued tightening in the labour market also supports tighter monetary policy, and we look for at least another 150bps of tightening by year-end. An unemployment rate below 4% underlines the need for additional tightening. After hiking this month, the market is currently pricing more than 35bps of tightening for the 7 June meeting.”

“We continue to view the AUD as undervalued versus supportive terms of trade and long-term interest rate differentials. However, rising external headwinds, linked to rising Chinese concerns, suggest AUD bulls may need to be patient.”
 

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