The RBA rate decision was once again a bit of a surprise as the central bank went with hiking the cash rate by 50 bps (instead of the debate between 25 bps and 40 bps coming into the decision) here.
There are hawkish undertones all over the rate statement with the RBA expecting even higher inflation than what they had forecast last month. That will increase the belief that more aggressive rate hikes are on the cards by the central bank. The light change in the forward guidance also reaffirms that as the RBA signals that they expect to take "further steps in the process of normalising monetary conditions over the months ahead".
The aussie benefited from the move with a push from 0.7185 to 0.7245 against the dollar, before gains are being tempered with towards 0.7220 at the moment. The 100-day moving average (red line) is a key level to watch on the day at 0.7228. I outlined this earlier here.
The question for the aussie now is whether or not it can sustain gains and build a more bullish run. I'm still skeptical despite the RBA surprise. A lot of rate hikes are already priced in to the front-end, with cash rate futures expecting the RBA to hike to 3% by February next year. In that sense, the more aggressive tone now is much needed to vindicate that pricing into being a reality.
The last thing the RBA would want is to end up in a situation like the BOE, where struggling economic conditions will hamper rate hike expectations and the central bank's resolve.
For now, the aussie likes what it sees from the RBA but as mentioned earlier going into decision, gains may be fleeting and more tempered with as long as risk sentiment remains more dour on the day.
US futures are still keeping lower with S&P 500 futures down 0.6% at the moment. The selling in equities alongside the key technical level above are strong arguments to keep aussie gains in check for the time being.
