AUD/USD support: RBA on hold with strong jobs market, sticky CPI; Fed policy divergence

HSBC is eyeing the RBA higher for longer vs. an easing Federal Reserve. Various reports from analysts at the bank cite the strong labour market report yesterday alongside sticky high inflation as helping to bolster both:

• market expectations for the Reserve Bank of Australia to keep rates unchanged
• and for AUD/USD

Conclusions of the reports include rate cuts not being seen for some time ahead:

• RBA on hold until Q2 2025
• RBA will only ease in a limited fashion in 2025

On the jobs market HSBC mention support from public sector employment. This is attracting a lot of attention in Australia and is a good point, if it dissipates the risk is for higher unemployment in Australia.

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I posted earlier in the week on the likelihood of lower inflation reports to come:

• Australia CPI preview – CBA expect “Headline inflation in August back within RBA’s target”
• Australian August Monthly CPI preview – Westpac expect 2.7% y/y for the monthly read

The Reserve Bank of Australia meet next week. On hold expected. :

This article was written by Eamonn Sheridan at www.forexlive.com.