AUD/USD: Deterioration of Australia’s covid picture to offset hawkish RBA – Credit Suisse

The RBA’s hawkish surprise decision to move forward with tapering suggests that the bottom of the 0.7350-0.7730 Q3 target range of analysts at Credit Suisse for AUD/USD is a valid floor for the pair. What’s more, they are unwilling to take on a more AUD-bullish approach given lingering risks of lockdown escalations.

Surprising hawkish outcome

“Although we acknowledge that yesterday’s meeting represented a hawkish surprise, we are reluctant to outright favour AUD/USD upside. It is likely that dovish central bank risks will persist as long as the COVID-19 situation continues to deteriorate.”

“The RBA’s hawkish surprise suggests that the bottom of our 0.7350-0.7730 Q3 target range should represent a valid floor for the pair. The relatively tame reaction in the currency and in Australia’s sovereign yields likely emboldens the RBA to continue tapering.” 

“We are unwilling to take on a more bullish approach given lingering risks of lockdown escalations. We also flag that the external environment remains unconducive to gains for commodity currencies.”