UBS daily forex Late but clear reaction of Aussie to rate hike

Late but clear reaction of Aussie to rate hike

The resumption of rate hikes the Reserve Bank of Australia (RBA) by 25 bps, to 4.00%, has widened the
gap between the Australia's cash rate target and its US counterpart to 3.75 percentage points, the most in
more than a year. The RBA highlighted the robust recovery in Australia, where financial sectors are not as
severely impaired by the financial crisis than in other countries. The RBA sees both growth and inflation
closer to trend over the coming year, not having as much excess capacity as in other major economies. It is
thus only consistent to move interest rates closer to their average, which is still 75 to 100bps above the
current level. The rather subdued inflation outlook should not hamper this normalization process, in our
view. However, in the short term the Aussie remains exposed to the risk sentiment from elevated global
sovereign worries. We suggest using dips in the AUD for entry levels versus USD, JPY and GBP.



Late but clear reaction of Aussie to rate hike UBS daily forex -