ING’s Francesco Pesole highlights the Australian Dollar as a key G10 outperformer, supported by strong RBA hike expectations and high Oil prices. Markets now assign a 70% probability to a 25bp hike next week, with AUD/USD seen targeting 0.7200 if equities hold up. However, aggressive positioning raises the risk of a post‑decision correction.
RBA pricing lifts Aussie but risks build
“The Aussie dollar remains the big winner in G10.”
“Equity instability remains a major correction risk for AUD, but we must also note that markets are turning rather aggressive in pricing another RBA hike on 17 March.”
“The implied probability of a 25bp increase next week is now 70% in the Cash Rate future market, and economic consensus also seems to be aligning with the hike call.”
“That is offering more tailwind to AUD, with CME reporting a large surge of call option volume driven by aggressive speculative flows ahead of the RBA announcement.”
“In a scenario where oil prices remain high, but equities show more signs of relative resilience, 0.7200 appears to be a very reasonable target for AUD/USD going into the RBA decision.”
“We could then see a sell-the-fact correction given aggressive positioning and the RBA striking a cautious tone on further tightening, given high uncertainty.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
