Brown Brothers Harriman’s (BBH) Elias Haddad notes the Australian Dollar (AUD) largely ignored the Reserve Bank of Australia’s (RBA) August Minutes, which reiterated Governor Michele Bullock’s warning that another rate hike is quite possible. Futures imply around 60% odds of a final 25 bps hike to 4.60% by year-end. Haddad sees risks skewed toward an extended pause but highlights Australia’s attractive carry and strategic commodity exposure as key AUD tailwinds.

RBA path and AUD tailwinds

“AUD ignored the release of the RBA August meeting Minutes. The Minutes reinforced Governor Michele Bullock’s warning that another rate hike was “quite possible.””

“According to the Minutes “Several members judged that it was quite possible that the upside risks to the inflation forecast would crystallise, requiring some further tightening.””

“RBA cash rate futures continue to imply 60% odds of one final 25bps hike by year end to 4.60%.”

“In our view, the risk is skewed towards a more extended pause in the RBA tightening cycle because policy is already somewhat restrictive.”

“Still, Australia’s attractive carry alongside the country’s strategic exposure to commodities linked to energy, AI, and defense remain key AUD tailwinds.”