The Reserve Bank of Australia (RBA) raised the Official Cash Rate (OCR) by 50 basis points (bps) from 0.85% to 1.35%, as widely expected. AUD/USD fell, and market pared back rate hikes expectation. Economists at OCBC expect the pair to extend its fall towards next support at 0.6762.

RBA to under-deliver 

“The RBA hiked its OCR by 50 bps as widely expected, but there was a lack of a hawkish tilt at the MPC statement. The monetary policy outlook paragraph is almost the same as before.”

“We have viewed the AUD market pricing of rate hikes as the most overly hawkish among major markets; the current pricing of additional hikes of 173 bps still looks a bit too hawkish compared to the RBA’s inflation assessment.” 

“With the RBA likely under-delivering and the global recession fears, AUD/USD shall face a downward pressure and the next support is not far away at 0.6762.”