The Reserve Bank of Australia (RBA)  raised its cash rate by 50 basis points (bps) to 1.35% as it moves to tame strengthening inflation. As the rate decision did not entail any surprises, the aussie was unable to benefit. Economists at Commerzbank expect the Australian dollar to remain under pressure for now.

RBA plays its cards close to its chest

“A 50 bps rate hike had been expected and that is exactly what the RBA delivered. The RBA expects inflation to peak later on in the year. As far as future monetary policy is concerned the RBA once again is playing its cards close to its chest. Even though it will normalise monetary policy further over the coming months, extent and timing depend on future data developments though. The RBA does not want to commit more clearly.”

“It can be expected that also over the coming months the RBA will tighten its monetary policy in a controlled manner, not too much and not too little. However, that is unlikely to be sufficient for AUD and AUD is unlikely to receive support on this front.”

“The aussie is likely to be largely driven by external factors such as the prospects for economic developments in China and market sentiment. As recession fears are likely to continue for some time, AUD is likely to remain under pressure for now.”