BOJ hike certain, RBA and Fed on hold as Iran deal reshapes central bank outlook
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The Iran peace framework has effectively superseded this week's central bank calendar as the dominant market driver, with oil price direction doing more work on currencies like the Australian dollar than any RBA statement could. The BOJ hike is fully priced and unlikely to move t
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The desk argues that the Reserve Bank of Australia (RBA) may need to reconsider its current policy stance due to rising external inflation pressures, particularly from energy prices triggered by geopolitical tensions in the Middle East. As highlighted by MUFG in their commentary, the RBA's recent communications suggest it is strategically biding its time, yet the risk of a rate hike still looms, especially if inflation remains driven by external forces [source]. With markets already adjusting—evidenced by a drift upwards in Australian two-year yields—there's a tangible narrative forming around potential monetary policy shifts ahead of the US midterms in November, especially if energy costs continue climbing. This aligns with the analytical sentiment across the FX sector as traders look to hedge against further volatility in AUD/JPY as rates and inflation expectations shift.
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