RBA Minutes Signal Australia Central Bank Remains Ready to Raise Interest Rates if Inflation Persists 
Taiwan Central Bank Likely to Keep Interest Rates Unchanged Through 2027 
China Sets 1.25% Overnight Reverse Repo Rate Below Market Expectations 
ECB Keeps July Rate Options Open Amid Iran War Energy Price Risks 
Mary Daly Says AI Uncertainty Clouds Fed Rate Outlook Despite Restrictive Policy 
Japan Signals Preference for Low Interest Rates as BOJ Policy Debate Intensifies 
Central Banks Eye Gold, Reduce Dollar Exposure as AI Adoption Accelerates: OMFIF Survey 
New Zealand Unemployment and Inflation Debate Intensifies Ahead of 2026 Election 
BOJ Hawk Signals Faster Interest Rate Hikes Amid Inflation Risks 
BoE Policymaker Alan Taylor Signals No Need for Interest Rate Hike Amid Iran War Inflation Risks 
Malaysia Central Bank Moves to Support Ringgit Amid Foreign Fund Outflows 
Denmark Central Bank Intervenes to Support Krone Peg Against Euro 
Japan Signals Surprise Yen Intervention Strategy as BOJ Hawkish Stance Puts FX Traders on Alert 
Driving Forces:
RBA has more reasons for further monetary policy easing. The RBA assumes inflation expectations will return to their long-term average, whereas we see a risk that they stay low for longer, helping cement low actual inflation. There has been a widespread decline in inflation expectations.
The further unwinding of the political risk premium and short positioning for the MXN. More focus on AUD fundamentals.
Stabilization of oil price to crawl higher over the next quarters as base metals to underperform the energy sector.
FX markets have tunnel vision. Fed Chair Yellen’s speech at Jackson Hole will be the key catalyst for a move, but even then it is not clear that broad ranges are set to break for the AUD. Downside risks remain, but a move below USD0.74 remains a big ask.
Trade Mechanism: Entry - 14.0270, 1y target: 12.50, stop: 14.70, Carry: approx.+2.9% p.a.
Risk Profiling: How much would USD/MXN rise if Donald Trump were to win the US presidency? And how much would AUD/USD fall? Certainly, the Trump risk is more fully priced into the MXN than the AUD, and this would limit the extent of the loss from his winning. Current pricing seems to overstate the risk (which we estimate at 25%).
