ING Research discusses its expectations for the 0430 GMT RBA decision.
"The Reserve Bank of Australia is set to hike interest rates tomorrow morning, with the consensus seemingly centred around a 40bp move to bring rates to 0.75%. That would merely follow the notion that the RBA stands ready to do a little less than the Fed in the tightening cycle: after all, the inflation picture is not as concerning in Australia (the headline rate was at 5.1% in 1Q), and lockdowns in China are inevitably clouding the domestic economic picture," ING notes.
"While 40bp is our base case too, we see some non-negligible risk the RBA will actually go for a 50bp hike, and potentially slow down the pace of tightening compared to the Fed later in the summer. That would still keep the policy rate in Australia below the US one, and some front-loading could be a viable option at this stage. The swap market indicates investors are pricing in 28bp of tightening tomorrow, which does leave some room for hawkish surprises. Still, any benefit to the Australian dollar should prove short-lived as the lingering uncertainty around Chinese activity should continue to weigh on the antipodeans. We still expect a return to the 0.7000 mark in AUD/USD over the coming weeks," ING adds.
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