What the desk is arguing
The desk frames this as a pivotal moment for the RBA, with Bullock's remarks indicating a readiness to act decisively against inflation. The governor's acknowledgment of the restrictive cash rate suggests that the RBA is prepared to respond to inflationary pressures, particularly those exacerbated by ongoing geopolitical conflicts.
Supporting this view, Bullock noted that the war has negatively impacted income levels, making consumers feel poorer and potentially influencing inflation expectations. This aligns with our analysis that the RBA may need to maintain a hawkish stance if inflationary pressures persist, as indicated by the current cash rate being described as restrictive.
Where it sits in our coverage
Our consensus target for AUD/USD is 1.075, with a range between 1.04 and 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This view aligns with jpmorgan, which shares a similar outlook on the potential for further rate hikes, while bofa presents a more cautious stance, suggesting lower targets. The desk's call is at the upper bound of the current consensus range, reflecting a more aggressive approach to inflation management.
How other firms see it
Firms aligned with our view, such as jpmorgan, anticipate further tightening from the RBA, while bofa takes a contrary position, expecting a more dovish approach. This divergence highlights the uncertainty surrounding inflation dynamics and economic growth.
Watch the AUD/USD trajectory closely, as it will be influenced by the RBA's policy decisions and broader economic indicators, particularly inflation data and geopolitical developments.
What the calendar says
(No upcoming events are scheduled, so this section is omitted.)