Deutsche Bank stands alone with RBA hold call as 31 of 32 economists tip a hike
At a Glance
The desk anticipates a significant divergence from market expectations ahead of the upcoming Reserve Bank of Australia (RBA) meeting. Per the full note , Deutsche Bank's lone call for a hold on rates contrasts sharply with the consensus that favors a quarter-point hike, likely leading to a downward revision of the Australian dollar. With the current inflation rate at 3.7%, traders have about an 85% chance priced in for a hike, but the hold call suggests reconsidering the broader economic indicators such as rising unemployment and easing inflation pressures.
Key Takeaways
- 01Deutsche Bank's lone hold call against market consensus highlights potential for significant AUD volatility.
- 02Rising unemployment and stable inflation suggest RBA may delay further rate hikes.
- 03Current market pricing indicates an 85% chance of RBA opting for a hike, creating an asymmetric risk.
Full Analysis
What the desk is arguing
The desk frames this as a potential catalytic moment for the Australian dollar, which may face downward pressure if the RBA opts for a surprise hold. Deutsche Bank's analysis indicates that focusing on the RBA's own forecasts rather than prevailing market sentiment could lead to a decision that disrupts expectations in the FX space.
Supporting Deutsche Bank's view, the labor market has shown signs of cooling, with the unemployment rate increasing to 4.7%. This backdrop, coupled with a more dovish outlook on oil prices—where Deutsche forecasts Brent crude at $90 by early next year—could further justify the RBA's hesitation to raise rates immediately, as inflation appears to be aligning with estimates rather than exceeding them.
Where it sits in our coverage
Our current consensus target for AUD/USD stands at 0.7000, with a range of 0.6600 to 0.7300. Specific firm targets include: - ING: Mar26 0.7300 - Rabobank: Mar26 0.7095 - Goldman: Mar26 0.6800
This view of a potential hold diverges from the prevailing consensus, where most banks, including JPMorgan and Natixis, expect a hike, suggesting Deutsche Bank's position is on the fringe of market expectations and could lead to significant volatility.
How other firms see it
Many firms, including Goldman and JPMorgan, align with the expectation of a modest hike based on recent inflation data; however, this stands in stark contrast to Deutsche Bank's solitary hold forecast. On the contrary, banks such as ING are more bullish on the AUD, forecasting upward movement against the USD in the near term.
Monitor the AUD/USD pair closely, particularly as it relates to any potential changes in the RBA's stance, which could ripple through other pairs such as NZD/USD, reflecting broader trans-Tasman economic ties and central bank policies.
Market Implications
Trade cautiously around the RBA meeting, particularly noting the potential support level at 0.7000 for AUD/USD. A hold could present an ideal opportunity for short positions in anticipation of a sell-off in the AUD.
AUD/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Rabobank | Bullish | 0.7200 |
ING | Bullish | 0.7100 |
MUFG | Bullish | 0.7000 |
From the original
With a hike close to fully priced, the asymmetry is clear. A hold, as Deutsche Bank expects, would likely knock the Australian dollar lower and rally short-dated government bonds, while a hike would largely confirm what markets already expect. The Reserve Bank of New Zealand’s su
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The desk anticipates a tightening action from the Reserve Bank of Australia (RBA) at its upcoming meeting, despite Deutsche Bank's dissenting view. As highlighted in the note by Eamonn Sheridan, overwhelming consensus suggests that a quarter-point hike to 4.85% is imminent, supported by significant inflationary pressures evidenced by a CPI of 3.7% for the September quarter. The market pricing, at approximately 85% for the hike, underscores the general expectation that the RBA is steadfast in its policy adjustment path. Given this context, the Aussie dollar (AUD) is seen as likely to strengthen, particularly in relation to the upcoming inflation data slated for December, which will provide further clarity on the RBA’s direction going into 2027.
JPMorgan joins hike call for RBA’s November meeting, sees tightening bias persisting
The desk views the upcoming Reserve Bank of Australia (RBA) meeting as a critical event for the Australian dollar, particularly following JPMorgan's recent endorsement of a rate hike at the November meeting. Per the full note, a supposed 90% chance of a hike is currently priced in, which suggests that a hold could significantly challenge short-dated bond yields and the AUD. Market participants will be keen on the RBA's future guidance and updated forecasts on inflation, as this will shape positions going forward.
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