RBA likely to follow up with another rate hike if inflation does not fall as much as expected – Commerzbank

The Aussie received a brief boost from Thursday’s employment data, but this quickly evaporated as the USD strengthened. Economists at Commerzbank analyze AUD outlook.

Between Australia’s labour market data and inflation data

So far, the labor market does not seem to be feeling the effects of the RBA’s significant interest rate hikes as expected.

Next week Wednesday’s Q2 inflation figures will be the last data point before the next monetary policy meeting in early August. The reported inflation for Q2 is likely to weaken further. The interesting question should be: by how much? After all, that’s the key data point for the RBA’s upcoming policy decision.

So far, the currency market seems undecided on whether another rate hike will follow. The relatively strong labor market argues for another rate hike, which also explains the Aussie’s initial strong reaction. More important, however, is inflation. If it doesn’t fall as much as expected, the RBA is likely to follow up with another rate hike.