The Reserve Bank of Australia (RBA) ended QE but sounded patient on rate increases. The muted impact on AUD/USD is another indication that rate differentials are a secondary driver for the pair, according to economists at ING who expect the aussie to be capped at the 0.71/72 area.
A patient RBA remains a secondary driver for AUD
“While policymakers decided to end asset purchases, such a decision explicitly ‘does not imply a near-term increase in interest rates’.”
“We think that today’s post-RBA price action clearly indicates that rate differentials have remained a secondary driver for AUD/USD, unable to drive a significant divergence from the general USD/risk environment at the moment.”
“Periods of USD long trimming should still see AUD emerge as an outperformer due to its still extensive net-short positioning, but we think the very USD-supportive Fed stance on tightening will prevent a significant rebalancing in USD positioning for most of 2022.
“A recovery in risk sentiment can help AUD regain some more ground, but we think that any recovery in AUD/USD should stall around the 0.71/0.72 area.”