AUD/USD has quickly climbed back towards the 0.70 level as the Australian unemployment rate falls to record low. However, economists at MUFG Bank expect the aussie to remain under pressure amid global growth concerns.
RBA to continue tightening policy at their next meeting by 25bps
“Australia revealed that the unemployment rate fell to its lowest level since the 1970’s at 3.85% in April. It will add to the RBA’s concerns that tight labour market conditions will fuel a pick-up in wage growth and pose upside risks to the inflation outlook.”
“We expect the RBA to respond by continuing by tightening policy at their next meeting on 7th June by 25bps. The Australian rate market is already fully discounting a 25bps hike, and there is little speculation over a larger 50bps hike.”
“We don’t believe the favourable domestic developments are sufficient to outweigh building global growth concerns, and as such view risks as tilted to the downside for the aussie in the near-term.”