AUD: Which comes first - A$ 0.75 or 0.85? - Westpac

The latest RBA minutes revealed a discussion on neutral policy rates had taken place on July 4, and with the backdrop of other central bank “normalisation” discussion in recent weeks, FX markets were quick to jump on this as a sign an RBA hike might not be far away, explains the analysis team at Westpac.

Key Quotes

“This has lifted the A$ to the top end of our value range and seen headlines suggesting 0.85 is possible.”

“To be sure, the midpoint of our fair value model has risen by 3 cents in the last 6 weeks, helped by reduced Fed pricing, increased RBA pricing and a sharp rise in commodity prices.”

“However, a move above 0.80 would leave the A$ through the top of our fair value range – a move to 0.85 would see it as overvalued as it has ever been over 10yrs of history.”

“So which comes first 0.75 or 0.85? We still expect 0.75.”