AUD Remains Strong, Watch Fed and Aussie Q2 CPI's - UOB
While the AUD/USD remains strong, analysts at UOB reminded us that the Reserve Bank of Australia kept the Official Cash Rate (OCR) unchanged at a record low 1.75% on Tuesday.
The decision to keep rates steady follows a raft of strong economic data. However, indicators still point to weak inflation.
While the RBA could lower official interest rates again, it would also further inflate an already inflated housing market.
Another major factor in play at the moment is the Fed Reserve.
If the Fed does lift its policy rate in coming months (although the markets have almost entirely ruled out a Fed June rate hike) and this pushes the AUD lower, it could discourage the RBA from cutting.
We are keeping to our view that the RBA rate cut in May marks the end of the current easing cycle. The risk, though, to our view is the 2Q CPI report due on 27 July."