A$ Gains Slow as 75bps Hike Not Likely At Next RBA Meeting

The A$ is off earlier highs. We touched 0.6980, but are now back around 0.6960, as RBA Governor Lowe states the RBA didn't contemplate a 75bps hike at its recent policy meeting. A 25-50bps move seems to be the most likely outcome at the July meeting.

• Lowe’s speech has reiterated the central bank's recent hawkish outlook, particularly around stronger than expected inflation and the need to tighten further.
• Still, in the Q&A Lowe notes that the central bank discussed a 25bp or a 50bps move at the last meeting and expects to do the same at the July policy meeting. In effect this suggests the RBA is not considering a larger 75bps move at the next policy meeting.
• This last factor has pulled the AU-US yield differential back lower. We were above 12bps earlier, but now sit back close to flat.
• These moves has also slowed gains down in the AUD/NZD cross, which has seen some selling interest emerge above the 1.1000 level.