AUD/USD: China’s clouded outlook to keep aussie capped to the 0.72-0.73 area – ING

Tuesday’s surprise 25bp rate hike by the Reserve Bank of Australia (RBA) pushed the aussie higher. However, in the view of economists at ING, the AUD/USD upside is limited despite RBA's hawkish shift.

Markets are now pricing 270bp of tightening by the end of the year

“While the RBA offered some signals that it is now committed to a period of rising interest rates to fight inflation, markets are now pricing 270bp of tightening by the end of the year, which may have fallen too far on the hawkish side.”

“For now, we think that an external environment that remains negatively affected by China’s clouded outlook will contribute to keeping AUD/USD capped to the 0.72-0.73 area in the coming weeks.”