AUD: Hawkish RBA hold to help AUD – ING

The Reserve Bank of Australia held rates unchanged and struck a moderately hawkish tone in the statement and press conference.

AUD/USD targets 0.68 in the fourth quarter

"Governor Michele Bullock reiterated increased concerns about price stickiness, despite admitting to monthly CPI volatility. The sturdy jobs market is also playing a role in the more hawkish assessment, in spite of non-negligible economic uncertainty."

"Markets are now pricing in only 10bp of easing for the November meeting and 13bp by December. Our call remains that the RBA should cut again in the fourth quarter, but risks are now more balanced. Expect even higher short-term rates and AUD sensitivity to incoming inflation and jobs market data."

"AUD has been one of our favourite currencies into this RBA meeting, and we think it has some further room to run, also in the crosses against currencies that have unattractive domestic central bank stories (CAD, above all). On AUD/USD, we still target 0.68 in the fourth quarter."