A$ Dips Post RBA

AUD/USD is lower post the RBA announcement. We got to 0.6885 as the RBA hike but dipped back to the low 0.6850 region as the statement was digested by the market. We have settled somewhat now, back above 0.6860. The A$ has unwound some of its outperformance on crosses as well.

• Much of the statement is a mirror image of the previous statement. The RBA expects inflation to peak later this year, but will provide an updated set of forecasts post the release of the next CPI print at the end of this month.
• The main risks are how household spending evolves, although the RBA continues to highlight the high level of household savings. The other risk is the global outlook.
• Importantly, the RBA no longer described rates as being very low, unlike the previous statement, although it still expects to further normalize policy in the months ahead.
• AU government bond yields are lower, the 2yr is off by around 6bps post the announcement (2.56% to 2.49%). This has weighed on the AU-US 2yr spread, which is back to -45bps, from -39bps prior.