Rabobank says dovish RBA to keep AUD/USD from rising, target 0.71 by year-end

Remarks from Rabo on the Australian dollar and Reserve Bank of Australia:

  • The RBA retains a dovish tone
  • is pushing ahead with its previous decision to taper its QE programme from September mostly on the expectation that the economy will bounce sharply once restrictions are lifted
  • RBA has become surprisingly prescriptive in its view that wages will need to be growing by at least 3% to push CPI inflation sustainably into the middle of the 2% to 3% target band. This will then trigger a rise in the Cash rate. It is the Bank’s view that this will not happen before 2024. This dovish outlook is likely to restrain the AUD
  • Despite the support from higher energy prices, we see risk of a dip to AUD/USD 0.71 on a one-to-three month view

AUD/USD was last on approach to 0.71 in mid-August. Despite all the bad news for it (China, lockdowns, and what have you) its stabilised somewhat since:

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