Market outlook for the week of 4th - 8th May

What the desk is arguing

The desk believes that the upcoming week will be pivotal for FX traders, particularly due to the RBA's expected rate hike and the U.S. employment data releases. Per the full note source, the RBA is anticipated to raise rates by 25 bps to 4.35%, driven by higher-than-expected Q1 inflation and geopolitical tensions affecting fuel costs.

Supporting this view, analysts from Wells Fargo highlight that the tight labor market and resilient economic conditions in Australia bolster the case for immediate policy action. The RBA's communication has not pushed back against market expectations for further hikes, indicating alignment with tightening sentiment.

Where it sits in our coverage

Our consensus target for AUD/USD is 1.075, with a range of 1.04 to 1.12. Key firms contributing to this outlook include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26) - citi: 1.12 (Mar26)

This view aligns with jpmorgan and citi, who see potential for further AUD appreciation, while bofa remains more cautious, placing their target at the lower end of the spectrum.

How other firms see it

Firms like jpmorgan and citi are aligned in their bullish outlook for AUD, anticipating that the RBA's actions will support the currency. Conversely, bofa holds a more bearish stance, reflecting concerns over economic growth and inflation dynamics.

Traders should also monitor the USD's performance against the backdrop of the upcoming U.S. labor data, particularly average hourly earnings and non-farm payrolls, which could significantly influence USD positioning.

What the calendar says

With the RBA meeting on Tuesday and critical U.S. labor data due on Friday, traders should remain vigilant for any shifts in market sentiment that could arise from these events.