Australia and New Zealand Banking Group (ANZ) has indicated that it expects the Reserve Bank of Australia (RBA) to raise interest rates by 25 basis points in its upcoming policy meeting on Tuesday. ANZ also sees scope for the Australian dollar (AUD) to rally, especially against the New Zealand dollar (NZD) following the RBA’s decision.
Key Points:
Expectation of Rate Hike: Despite the recent weaker-than-expected Consumer Price Index (CPI) data in Australia, ANZ is expecting a 25 basis points hike in interest rates from the RBA in its meeting next week. The bank notes that the decision will be "finely balanced".
Potential AUD Rally: ANZ highlights that recent RBA decisions have not resulted in much upside for the AUD, and in some cases led to downside. However, a hawkish outcome from the RBA this time could trigger a recovery for the AUD. This is more likely to be expressed against other G10 currencies than against the US dollar.
AUD Strength Against NZD: ANZ predicts that the New Zealand dollar could experience further downside, especially in comparison to the Australian dollar if the RBA goes through with the rate hike.
Summary:
ANZ anticipates that the RBA will implement a 25 basis point rate hike in its upcoming policy meeting, despite recent weak CPI data. The bank believes that this decision could provide an impetus for the Australian dollar to rally, particularly against the New Zealand dollar. The AUD's potential rally is expected to be more pronounced against G10 currencies than against the US dollar. The New Zealand dollar is expected to face downward pressure, especially when compared to the AUD following the RBA’s decision.
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