- Yields on Aussie 10 Year jumped high as Market price more aggressive action from RBA.
- Fall of Australian consumer sentiment in February could restrict the bullish move of the quote – AUD/USD.
- US CPI data is largely eyed by the traders to get clues on interest rate hikes.
Australian dollar trades high against the American dollar during Wednesday Asian session. Aussie is better bid today as Markets have priced in more moves by the Reserve Bank of Australia (RBA), after the central bank conceded a rate rise could come late next year if the economy continued to surprise on the upside.
As per Reuters, “A first move to 0.25% is implied by June, while in the past week futures 0#YIB: have added in a fifth hike for this year to reach 1.25%. Further increases to 2.5% are priced in by July 2023.”
As a response, the Australian bond market has taken a beating this week. Yields on 10-years AU10YT=RR have surged 25 basis points in four sessions to hit 2.10%, and briefly reached their highest since March 2019
Analysts at TD Securities argued. ”We think RBA is closer to their inflation objectives and could well afford to signal a more hawkish stance given the recent better data outturns.”
On the other hand, A measure of Australian consumer sentiment fell for a third month in February since higher living costs from petrol to rent undermined finances and overshadowed an easing in coronavirus cases.
Westpac chief economist Bill Evans. said “The most likely explanations for these elevated pressures on finances relate to: Omicron-related disruptions to activity and earnings at the start of the year; the rising cost of living; and the prospect of rising interest rates.”
Investors now await U.S. inflation data due on Thursday to take clues of the U.S. Federal Reserve’s timeline on interest rate hikes.
AUD/USD 4 Hour Chart:
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