Australia has once again surprised the market with a bold and drastic move. While other central banks have chosen to remain silent, Sydney continues to press the gas pedal. The economic climate is now increasingly heated and full of question marks.
The RBA has raised interest rates for the third time in a row to 4.35 percent now. This move proves that Australia is very desperate to curb inflation that is still stubborn. The market now sees Australia as the most aggressive 'outlier' on the global stage.
This increase occurs as the energy crisis in the Strait of Hormuz is escalating. The closure of the world's main oil route has increased the cost of living for Australians. Traders are now starting to reassess the strength of the AUD currency against gold.
Despite rising interest rates, the Australian labor market remains very strong. Low unemployment gives the RBA room to continue acting more aggressively. The implication is that gold may be pressured if other central banks follow suit.
UPCOMING MARKET EXPECTATIONS
If the RBA continues to raise rates until it reaches the expected level of 4.7 percent. The AUD will continue to strengthen and put pressure on the currency market with lower central bank rates.
However, this aggressive move could trigger a recession in Australia.
IMPORTANT EVENTS UPCOMING
The Australian government's annual budget next week is the main focus of investors. Excessive cost of living subsidies could trigger additional inflation in the market.
Next quarter's CPI Inflation data will also be decisive in whether this interest rate hike is worth it or not. If inflation remains stubborn, the market will expect more crazy actions by the RBA.
The market's face is now showing a very deep expression of concern. This momentum of interest rate hikes feels like an increasingly tight noose. There is always opportunity behind the chaos if you stay calm.
