The Reserve Bank of Australia surprised markets by hiking rates by 25 bps vs the 15 bps expected. The RBA Board stated that inflation was more of a problem than it had expected and it noted price pressures in the labour market which were set to rise even further. So, this concern means the RBA will need to hike rates more quickly than it had previously anticipated.

This means that the AUD should find medium-term buyers.

The Fed met this week and it had set a high bar to be more hawkish than the market was expecting. The Fed raised interest rates by 50 bps, announced the start of QT, and signalled multiple hikes to come this year. However, this was what markets had been expecting. The focal point came from the fact that Jerome Powell ruled out a 75 bps hike. This allowed for a ‘buy the rumour, sell the fact’ response.

This means that the USD should find near term selling. This should mean the AUDUSD finds dip buyers over the course of next week.

Major Trade Risks: The major risk here is if there are further lockdowns in China due to COVID-19. Also, slowing growth metrics from China could weigh on the AUD and negate/weaken the AUDUSD upside bias.